FHA Multifamily Lending Requirements

[Joe H.]

I'm familiar with the basics of FHA loans, but haven't worked with one directly in 5 years, so I've heard a lot has changed. When it comes to qualifying for a multifamily building, how does the FHA treat rental income? I know when I first acquired a property with an FHA loan they basically counted 75% (or something like that) of the income towards the income side of my DTI ratio. Also, do they base this off current rents or market rents?

[Kevin L.]

I recently purchased a multi-family property with an FHA loan. They will count the current rental income towards your personal income which will allow you to purchase a more expensive property. I believe that it will change from bank to bank if it is 75% or 80% or even 100%. You could call around to a few local banks and ask.

[Account Closed]

Hi Joe - yes, you can use at least 75% of the MARKET rental income per the appraisal.  Be mindful that if you buy in a stagnant area where tenants have been living for a long time, the market rents may not be a true reflection of the income you could get if you put new tenants in at the true market rate.  Also, you use the word building - is this property more than 4 units?  Feel free to contact me with more specific questions.

[Richard Smith]

Does it matter if the property is presently vs. potentially occupied?