How to take out an FHA loan on a 4plex with only 3.5% down

How to take out an FHA loan on a 4plex with only 3.5% down

Real Estate Agent · Houston, TX · Member since 2019 · 4 posts · 0 votes

I'm getting into the real estate game and I feel my first step is to eliminate my living expenses and instead profit from it. I heard the best way to start is by taking out an FHA loan on a multi-family. As i'm looking for a lender, there seems to be a recurring pattern of confusion all around about the proper guidelines. For reference, I live in Houston, TX and my step-father is co-signing my loan. He will not be living there with me either. Now, some banks are saying they can only do 3.5% on a single family, another "only on a duplex no higher", another saying they "require 20-25% down for a 3-4plex" (which I feel defeats the whole purpose of the FHA loan, I can put 20-25% down on a conventional loan and not have to live there for a year) Many more are saying that since my co-signer won't be living there, they require more of a down payment. Now I am a server who's been laid off the entirety of this pandemic and don't have much to show income wise, but I do have a good amount of cash. If it turns out my co-signer is hurting me in getting the FHA, could I use the income from the property as income to help me get approved for the loan? Also, are there even any lenders out there that would approve a 4plex FHA loan with 3.5% down... and then with a co-signer who won't be living there. Appreciate anyones help and insight.

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  • Real Estate Broker · MA · Member since 2013 · 361 posts · 297 votes
    6y

    @Drew Acocella

    FHA transactions with a non-occupant co-borrower are limited to 75% LTV unless the co-borrower is related and the transaction is for a single family house. Without a co-borrower, lack of steady income will not allow you to qualify on your own.

    Fannie & Freddie won't allow non-occupant co-borrowers on anything but a single family.

  • Attorney · RI · Member since 2019 · 157 posts · 93 votes
    6y

    @Drew Acocella reach out to @Elise Marquette she might be able to help! We purchased a four-unit using an FHA 3.5% down loan and I have clients who recently purchased three- and four-unit properties with this loan, so you are not limited to a duplex.

    There's typicaly a 75% LTV limit if the borrower is not occupying the property, but I am pretty sure there are exceptions to this rule if the non-occupant co-borrower is a parent. Elise would know more than me though!

  • Real Estate Agent · Houston, TX · Member since 2019 · 4 posts · 0 votes
    6y

    Thank you guys for the info! I’ll look into to that @Erica Larence-Penna

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