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Buying A House With More Than One Living Unit

September 25, 2023


FHA mortgages are not limited to single-unit homes. Did you know that it’s possible to buy a home with an FHA loan that has as many as four living units?

First-time home buyers looking for smaller homes might not have considered using an FHA mortgage to buy a house with multiple living units. And doing so is not for everyone. But for those who do need that larger home, it’s an option worth looking into for more than one reason.

Multi-Unit Home Purchases Using An FHA Mortgage?

FHA loan rules in HUD 4000.1 permit the purchase of house with up to four living units without changing the basic loan approval structure. You won’t be asked to make a down payment larger percentagewise than for a single-unit home.

That said, a more expensive home will require more down payment money simply because the minimum 3.5% downpayment is higher for a pricier home.

FHA borrowers, like VA and USDA home loan applicants, must intend to occupy the home after purchase. FHA loan rules require owner occupancy as a condition of loan approval, but borrowers are free to use the other living units as rental units if they wish.

Buying a multi-unit home is an option for all financially qualified FHA loan applicants, not just first-time buyers. FHA mortgages are not need-based loans, have no income limits, and are for anyone with qualifying financials.

What To Know About Qualifying For A Multi-Unit Home Loan

FHA loan limits are higher for twom three, and four-unit homes than for single-unit properties. The FHA loan limits are set differently for each size of home.

Newcomers to the home loan process might assume the FHA loan limit for a single-unit home applies across the board after a quick glance at FHA loan limits.

But a closer look reveals higher loan limits for the bigger home as mentioned above. But there ARE differences (amongst participating lenders) when trying to qualify.

Your lender may require higher FICO scores than the FHA minimums for a multi-unit property.

What To Know About Buying A Multi-Unit Home

Not all lenders choose to offer all FHA loan options. That means some lenders just won’t offer an FHA multi-unit home loan. Some lenders don’t offer manufactured housing loans and some won’t allow construction mortgages for multi-unit homes even though FHA loan rules allow them.

It pays to ask each lender about the FHA multi-unit home options when shopping around for the right bank or financial institution.

It is never safe to assume all FHA lenders will present you with the same basic options, which is another reason to start comparing lenders as early as possible in the planning stages of your home loan.

Joe Wallace - Staff Writer

By Joe Wallace

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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