FHA Loan Requirement on Rents for 3-4 Unit Multi-Family

[Eric Jun]

Hi.

I have a 3-unit multifamily property under contract and I'm planning on applying for a FHA loan with a low down payment. Is there a requirement that the total monthly rent from other units has to be greater than the monthly mortgage payment I have to pay?

My mortgage broker is saying that there's no such requirement for a 2-unit multi-family FHA loan, but a 3-4 unit multi-family FHA loan requires that the total rent collected (actually the bank uses 75% of the total rent) must be greater than the monthly PITI including the mortgage insurance. I find this requirement very unusual.

Thank you.

[Jay Hurst]

Quote from @Eric Jun:

Hi.

I have a 3-unit multifamily property under contract and I'm planning on applying for a FHA loan with a low down payment. Is there a requirement that the total monthly rent from other units has to be greater than the monthly mortgage payment I have to pay?

My mortgage broker is saying that there's no such requirement for a 2-unit multi-family FHA loan, but a 3-4 unit multi-family FHA loan requires that the total rent collected (actually the bank uses 75% of the total rent) must be greater than the monthly PITI including the mortgage insurance. I find this requirement very unusual.

Thank you.

Yes, it is called the FHA self sufficiency test, and it only applies to 3-4 units. At current rates and prices it makes it very hard to only put down 3.5% and have this test passed. 2 unit properties are the sweet spot for 3.5% down.