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
June 27, 2023The FHA loan process is straightforward and has been successfully navigated by millions of homeowners. If you're considering an FHA loan to finance your home purchase, it pays to be prepared. To avoid mistakes before you start your loan application, homebuyers should keep these tips in mind.
June 20, 2023Can an FHA loan be approved if there are late or missed payments on the credit report? Navigating through financial challenges, such as escalating costs of living and employment uncertainties, can indeed make it difficult to maintain a perfect financial record.
June 15, 2023When you buy a home with an FHA mortgage, cash for closing costs and your down payment is required. It would be easy to assume you simply give the lender cash in the specified amount and that’s the end of the story.
May 20, 2023Did you know there is an FHA loan option that lets you build a house from the ground up? You can use this mortgage to build on land you own or on land you buy as part of the loan. But you will want to address some issues comparing construction loan options.
May 3, 2023Sometimes when buying a home there may be a question of surplus or excess land. You likely won’t face this issue when buying a condo unit, but for other types of purchases, this may be an important factor in the appraisal process.
