Using income generated from a property to qualify for FHA loan

[Michaela Perez]

I recently learned you are able to use potential income generated in a multifamily home to qualify for an FHA loan,I live in an expensive market so this beneficial for me but I don't know exactly how this works. I'd appreciate if someone can explain this to me or point me in the right direction.

[Derek Brickley]

Hi Michaela!  You can definitely use rental income from the other units to help you qualify.  When your chosen lender has an appraisal done on the property, you will get a comparative rent schedule for the other units.  You can use 75% of that value to help you qualify (boost your income) or if the other units are currently rented, they will just need a copy of the lease agreements and can use 75% of current rents.  This is just to compensate for vacancies, repairs, maintenance, cap ex, really all other expenses you will have from renting those units.  

I'm not sure your particular situation, and to see if there is another option better for you, I'd recommend talking to a lender that has experience with investing. If you live in an expensive market you can use Home Possible which is a Freddie Mac product. This does require slightly more downpayment for a multifamily property (5%) but depending on your situation there are some pricing advantages with potentially lower Private Mortgage Insurance. If you plan on acquiring more househacks in the future and you're eligible for this program, I believe this is a great option because you can have 2 Home Possible loans (acquire 2 househacks in 2 years) and then if you decide to get a 3rd househack you would then be able to use the FHA loan. If you use the FHA loan first, you would be unable to get 2 Home Possible loans. Just forward looking :)