FHA for single family condo vs FHA for duplex/triplex

[Nicholas Williams]

This might be an obvious answer but which would be more feasible for someone that doesn't have a lot of money to put down; Using my FHA loan to purchase a large 1bd 1bth condo and renting it out both longterm/shorterm or Using my FHA loan for a duplex/triplex and house hack?

[Erik Browning]

Hey @Nicholas Williams good question, there is another layer on top of buying a triplex/4-unit with FHA vs. a duplex. It's called The Self-Sufficiency Test.

The Self-Sufficiency Test is only for 3-4 units; a duplex does not need to pass this test.

Also, this is for FHA ONLY.

You first start out with finding the total monthly payment: Principal, Interest, Taxes, Insurance, FHA's Mortgage Insurance Premium (MIP), and HOA dues (if any)

Then find out the fair market value of all rents. Either the appraiser will do this for you OR if there are existing lease agreements, those can give you the value.

Then you must multiply the fair market value of all rents by 0.75. Why 0.75? Because you are going to live in one (required owner occupancy), but also because the FHA is accounting for vacancies.

Lastly, you divide the total monthly payment / the fair market value of all rents.

If the value you get by that calculation is < 100%, you will qualify for the loan

If the value you get by that calculation is > 100%, you DO NOT qualify for the loan

The property needs to be able to sustain itself. Again, this is for FHA 3 and 4 units. You can use this when searching for prospective properties prior to reaching out to your lender. Also you can do it yourself in a handy calculator I created. Send me a DM and I'll send it over to you >> it looks like this: