FHA Amount

[Ronald Green]

Im looking for a multi-family property and am trying to find an affordable option to purchase. After speaking with some investor friends of mine i received the advice to "Max Out" the FHA Loan because its the only shot ill have at getting a property with such little cash down. basically i could look for a Duplex at less than 300k and never have to worry about vacancies OR purchase a larger fourplex for 500k and increase the cash flow margin but have a much larger mortgage.

How wise is it to use my FHA loan for the maximum amount?

[Dan Rivera]

@Ronald Green Also, something to note... If you're looking at 3-4 family properties with FHA financing, you have to qualify for the loan and so does the property. The property must pass the self-sufficiency test, whereby 75% of the appraised monthly rental income must be greater than the monthly payments on the house (principal, interest, insurance, taxes).

For the property I'm purchasing now, the monthly payments would be around 2,500. The income for the studio, 1 bedroom, and 2 bedroom units were appraised at 850, 1000, and 1200 respectively (or 3050/month). 3050 x 75% = 2,288. In this case, the payments were greater than 75% of the rental income (i.e. It fails).