Buying Multi-Unit Property with an FHA Mortgage
March 27, 2025
Some house hunters ask why this rule exists. Some believe the rule serves as a lender risk mitigation strategy.
Being an owner-occupier allows for greater control over property maintenance and tenant relations, reducing potential liabilities. This active role also allows for a greater knowledge of the local market and the ability to adjust rental rates accordingly.
Not all borrowers want a duplex so they can become landlords. But those who do should know some of the intricacies of doing so.
FHA Duplex and Triplex Loan Limits
FHA loan limits, subject to regional market variations, determine the maximum borrowing available with a conforming FHA mortgage. Duplexes and triplexes qualify for increased loan amounts because they have additional living units. Single-unit residences have lower FHA loan limits.
Appraisals and Inspectons
The appraisal process determines the property's basic livability and remaining economic life. A home inspection is a more in-depth look at the condition of the units; do not skip this important step.
If you plan to be a landlord with your FHA loan, your lender may ask you to submit projected rental income, and you may need to show your bona fides as a previous landlord or property manager.
Loan Prep
These loans are riskier for the lender. Credit scores, down payments, and cash reserves are important for these transactions. Higher credit scores yield favorable loan terms, optimizing interest expenses.
Bigger down payments represent your ability to afford the loan and manage interest rate costs. Do you feel your credit isn't as good as you'd like it going into the process? Having a larger down payment could offset some lender concerns.
Issues to Consider
Owning property in a known natural disaster zone can be tricky. Increased dangers of wildfires, tornadoes, tropical storms, and heavy winter weather may force some borrowers to consider adjusting their budgets to include contingency funds, additional insurance, or other protections.
Don't forget to factor in your area's cost of living, maintenance, and routine upkeep of common areas.
FHA Loan Articles
May 14, 2025When you buy a home with an FHA mortgage, you must pay for both mortgage insurance and insurance to protect your property while paying on the loan. There are important nuances to these insurance policies to know before you start. What's the difference between insurance against water damage and flood insurance? That's just one example of the "hidden" expenses of buying your new home to budget for.
May 13, 2025Buying a home with an FHA mortgage means you'll need to know the FHA guidelines about the types of properties you can purchase with an FHA single-family home loan for residential purposes. How well do you understand these rules? Are you truly ready to start house hunting? We examine some key aspects of the process.
May 12, 2025FHA single-family home loans require a minimum 3.5% down payment for typical transactions. Saving for this requires planning and dedication, but it’s not impossible to save enough to make the down payment. How do people typically budget and save for this? Your financial needs and goals will play a big role in how much you decide to set aside for your new home, but here are some options to think about...
April 30, 2025 In a previous post, we discussed why FHA borrowers should carefully consider whether paying for discount points truly serves their best interests, focusing on factors like short-term homeownership, opportunity cost, FHA mortgage insurance, and the prevailing interest rate environment. Discount points are an option for borrowers willing to pay a fee to lower the interest rate by a set amount. This is not right for all borrowers, and you don't want to pay for points you won't benefit from during the loan term.
April 29, 2025Are you considering buying a home with an FHA loan? You'll likely talk to your participating lender about FHA loan "discount points" – fees you pay upfront for a lower interest rate on your mortgage. The idea behind discount points is a straightforward exchange: you spend money today to reduce your interest rate. Typically, one point equals one percent of your total FHA loan. In return, your interest rate might decrease by an amount you and the lender agree upon.
