Using an FHA loan to buy a commercial duplex

[Joshua King]

I put an offer on a duplex that I intend to house hack. The financing is FHA. The property is zoned as commercial and used for student housing. The counter offer came back in my price range. The question now is can a commercial property be owner occupied? And if so can it still be used as student housing? And last question. At least some of the students have renewed leases for next semester. Does FHA not let me buy or can leases be broken by a sale?

[Dave Jensen]

Hi. Great plan to house hack. FHA allows financing up to 4units so you're fine on a duplex. Calling it commercial - definitely ask your lender if they have an issue there. My lender says technically it's commercial since it's income producing. but he says his co views up to 4 units still as residential. FHA requires owner occupancy for the first year. Terminating leases...not sure why you would do that. If they're paying and are not wrecking the place, keep em and bump the rent to market level as soon as you can. The cool part of house hacking a duplex (or any rental) is you get to use a portion of the lease income as qualifying income to help you meet loan guidelines...helps your dti. FHA loan limits for low cost areas for a duplex is $456,275. The concern remains with an fha loan is that the place needs to appraise high enough. If it cash flows, a good appraiser will use all 3 methods to appraise (replacement, income, comp) so they should "get it" and agree it appraises. Breaking leases. That is generally subject to the terms of the lease that's in place. read the leases carefully on how a lease can be terminated. That'll give you your answer in that specific case. In all cases, negotiation solves problems. Hope this helps.