Everything You Need To Know About Getting A 4 Plex FHA Loan

Buying a 4 plex property with an FHA loan can be a great way to get started in real estate investing. With an FHA loan, you can buy a 4 unit property with as little as 3.5% down while living in one of the units. The rental income from the other units helps cover your mortgage payment and expenses.

If you’re considering purchasing a 4 plex here is what you need to know about getting an FHA loan

What Is A 4 Plex Property?

A 4 plex is a residential property that contains 4 separate housing units Each unit has its own living space along with a kitchen and bathroom

4 plexes are an attractive option for owner-occupiers who want to live in one unit and rent out the other 3. They provide built-in rental income to help cover expenses.

FHA Loan Basics

FHA loans are government-backed mortgages insured by the Federal Housing Administration They require lower down payments and credit scores compared to conventional loans,

Here are some key things to know about FHA loans:

Down payment as low as 3.5%
Credit score requirements start at 580
Debt-to-income ratio up to 43%
No income limits
Owner occupancy required in one unit

FHA loans can be used to purchase 1-4 unit residential properties. At least one unit must be owner-occupied.

Buying A 4 Plex With An FHA Loan

The process of buying a 4 plex with FHA financing is similar to purchasing a single family home. Here are the main steps:

Get Pre-Approved

Work with an FHA lender to get pre-approved. They will evaluate your credit, income, debts, and down payment funds. This shows sellers you are a serious buyer.

Find The Property

Search for 4 plexes in your target locations and price range. Work with a knowledgeable real estate agent that understands multifamily homes.

Make An Offer

Once you find a property you want to purchase, make an offer. Submit your pre-approval letter and earnest money deposit with the offer.

Property Appraisal

The lender will order an appraisal to confirm the value of the 4 plex. The appraiser will also estimate fair market rents for each unit.

Underwriting

During underwriting, the lender verifies all your financial information and approves the loan. Provide any additional documentation required.

Closing

At closing, you’ll sign the final loan documents and take ownership of the keys! Be sure rents are collected smoothly from any existing tenants.

FHA Loan Requirements

When buying a 4 plex with FHA, you must meet all the standard FHA loan requirements:

Credit Score: At least 580 FICO for 3.5% down payment. The higher your score, the better your interest rate.
Downpayment: 3.5% of purchase price for credit scores 580 and above. At least 1% must be from your own funds.
Debt-to-Income Ratio: Maximum of 43% front-end and 50% back-end. Includes all your monthly debt payments.
Cash Reserves: Varies by lender but often 3-6 months of mortgage payments. Used if you are unable to rent any units.
Owner Occupancy: You must live in one of the units as your primary residence for at least 12 months.
Property Requirements: The 4 plex must meet FHA minimum property standards and appraise for at least purchase price.
Loan Limits: Vary by area but around $970,800 for a 4 unit property in most counties.
Mortgage Insurance: Upfront 1.75% of loan amount + ongoing 0.45% – 0.85% annual premium.

Meeting these requirements ensures you qualify for the lowest down payment and most affordable financing.

Using Rental Income To Qualify

A major benefit of FHA loans is you can use prospective rents from non-owner units to qualify for the mortgage.

Here’s how it works:

Appraiser estimates fair market rent for each vacant unit
75% of rents are credited towards your income
Remaining 25% covers vacancies, maintenance, management
Rents must exceed PITI by 15% for 3-4 unit properties

This rental income helps you qualify for a larger loan amount and 4 plex properties. Consult your lender to calculate the rental income you can use.

The Pros And Cons Of A 4 Plex FHA Loan

Pros

Low 3.5% down payment
Use expected rents to qualify
One loan/closing for entire property
Interest rates below market average
Built-in tenant income from 3 units

Cons

Must live on site for 12+ months
Monthly mortgage insurance premiums
Loan limits may fall short in high cost areas
Cannot buy strictly as investment property
More responsibility as a landlord

As with any loan product, there are tradeoffs to consider. But for many, the pros outweigh the cons.

Alternatives To An FHA Loan

An FHA loan is not your only financing option for a 4 plex:

Conventional Loan

10-25% down payment required
No mortgage insurance
Can be used for investment properties

Portfolio Loan

Alternative lenders offer portfolio loans
Higher down payments around 20-30%
May have more flexible guidelines

Commercial Loan

Down payments 25-35%
Based on property performance
Higher rates and fees

Look into these options if you don’t meet FHA requirements or want different loan features. But FHA tends to offer the most lenient terms for owner-occupants.

Top Tips For Getting Approved

Follow these tips to boost your chances of getting approved for an FHA loan on a 4 plex:

Shop lenders and get pre-approved
Make a larger down payment if possible
Pay down existing debts to lower DTI
Build up cash reserves
Highlight experience managing rental properties
Be strategic with your purchase budget
Document all sources of income
Get pre-qualified, not just pre-approved

Putting your best foot forward gives you the strongest case for getting financed on great terms.

Is Buying A 4 Plex Right For You?

Purchasing a 4 plex investment property with an FHA loan can be rewarding but does require some effort and risk. Make sure you:

Have sufficient income to cover the mortgage if units are vacant
Are ready for landlord responsibilities like maintenance and tenants
Understand all costs including taxes, insurance, utilities
Prepare for property management if you don’t self-manage
Consult professionals like real estate agents, lenders, lawyers

If you have the drive and means to manage a 4 plex, it can provide stellar investment returns and income. But carefully consider if it fits your goals and abilities before diving in.

Connect With An Expert FHA Lender

The best way to learn if you qualify for an FHA loan on a 4 plex is to consult with a knowledgeable lender. They can guide you through the process and help determine the optimal financing strategies.

Reach out to a recommended FHA lender today to start your journey towards buying an investment 4 plex! With the right information and preparation, you can secure low down payment financing to start building your rental property portfolio.

How Does An Owner-Occupied FHA Multifamily Loan Work?

Apply online for expert recommendations with real interest rates and payments.

What Is An FHA Multifamily Loan?

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The Truth About Buying a 4 Plex Using FHA Loans and What You Need to Know!

FAQ

Can you build a 4 plex with an FHA loan?

Under the traditional FHA mortgage program, clients can purchase a home with up to 4 units. The advantage of this is that borrowers can get favorable terms such as a low down payment and they may receive lower interest rates than they would with the typical multifamily loan.

What is the minimum down payment for a 4 Plex FHA loan?

Down payment—percent of purchase price
Number of units	Conventional loan	FHA loan
2-units	5%	3.5%
3-units	5%	3.5%
4-units	5%	3.5%

What is the FHA 75% rule?

If you’re currently in the market looking to buy a triplex or fourplex with FHA financing, you need to see if the property’s rents pass the Self-Sufficiency Test. To be “self-sufficient” means that 75% of the property’s rents need to cover the monthly payments.

Is buying a 4 plex a good investment?

Fourplexes are a great investment strategy for beginners due to their relatively low barriers to entry. They’re a good way to generate a healthy cash flow, are easier to manage than four individual properties and you can use a residential loan to purchase a property.

Can you buy a fourplex with 35% down?

If you’re looking to buy a fourplex with 3.5% down, the best way to do this is to use an FHA loan. Note that if you’re going to buy a fourplex with an FHA loan you must plan to live in one of the units. FHA loans are popular with first-time homebuyers because they allow 3.5% down payments for those with credit scores of 580 or higher.

Can you buy a fourplex with an FHA loan?

Note that if you’re going to buy a fourplex with an FHA loan you must plan to live in one of the units. FHA loans are popular with first-time homebuyers because they allow 3.5% down payments for those with credit scores of 580 or higher. Borrowers must, however, pay mortgage insurance premiums, which protect the lender in the event of a default.

Can you buy a 4 plex with an FHA loan?

Buying your first 4 Plex can be an exciting and daunting task, especially if you are considering financing the purchase through an FHA loan. FHA loans are a popular option for first-time homebuyers as they offer more lenient credit and down payment requirements, making it easier to secure financing for a property.

Can you buy a fourplex with a commercial loan?

You can use a residential loan to purchase a fourplex instead of a commercial loan. Because all the units are in one building, property management is generally easier than managing several single-family properties or apartment buildings. Investing in a fourplex also has disadvantages to consider.