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FHA Two-To-Four Unit Multi-Family Loans
FHA (Federal Housing Administration) loans are a type of mortgage loan program offered by the U.S. Department of Housing and Urban Development (HUD). These loans are designed to make homeownership more accessible to a broader range of people, particularly those with lower credit scores or a smaller down payment.
Regarding two to four-unit multi-family properties, FHA offers a specific type of loan program known as the FHA Multi-Family Loan or FHA 2-4 Unit Loan. Here are some key points about FHA loans for multi-family properties:
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Property Eligibility: FHA 2-4 Unit Loans are designed for multi-family properties with 2 to 4 separate housing units. This can include duplexes, triplexes, and fourplexes. The borrower must also live in one of the units as their primary residence.
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Down Payment: One of the advantages of FHA loans is that they typically require a lower down payment compared to conventional loans. As of my last knowledge update in November 2023, the minimum down payment for an FHA loan is 3.5% of the purchase price. This means you can potentially purchase a multi-family property with a relatively small down payment.
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Loan Limits: FHA loan limits vary by location and are subject to change annually. The loan amount you can qualify for depends on the county where the property is located.
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Credit Requirements: FHA loans are more lenient when it comes to credit requirements compared to conventional loans. However, borrowers are still required to have a reasonably good credit history.
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Mortgage Insurance: FHA loans require mortgage insurance premiums (MIP) to protect the lender in case of default. There is an upfront MIP payment, which can be financed into the loan, as well as annual MIP payments.
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Owner-Occupancy: One of the key requirements for an FHA multi-family loan is that the borrower must live in one of the units as their primary residence. This is known as owner-occupancy and is intended to encourage homeownership.
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Property Condition: The property must meet certain FHA minimum property standards, which means it should be in good condition and meet safety and habitability requirements.
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Rental Income: If you’re purchasing a multi-family property with FHA financing, you can use the expected rental income from the additional units to help qualify for the loan.
It’s important to note that loan programs and guidelines can change over time, so I recommend contacting an FHA-approved lender or a mortgage broker for the most up-to-date information and discussing your specific situation if you want to obtain an FHA loan for a multi-family property. Additionally, rules and regulations may have evolved since my last knowledge update in November 2023, so verifying the current requirements is important.
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2 Replies
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Two-to-four unit multifamily homes are great investments for first time homebuyers who want to become real estate investors. Once you buy a two-to-four unit multifamily home, you can buy another owner occupant home one year later on a single family home because you need more space. However, you cannot have a single family home and buy a multifamily home one year later because it does not make sense.
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You can now qualify for two-to-four unit multifamily homes with conventional loans with 5% down payment. There’s no self sufficiency test on conventional loans.