FHA Loans for Owner-Occupied Multi-Family Properties

FHA will insure a loan on a 2 to 4 unit property with as little as 3.5 percent down, as long as at least one borrower moves into one of the units within 60 days of closing and intends to live there for at least a year. Rent from the other units can count as income when you qualify. Three- and four-unit properties face two extra rules: the rent from all units has to cover the mortgage payment, and you need 3 months of payments in reserve after closing.

For how this compares with conventional and other financing, see our tips for getting approved for an investment property mortgage.

2026 FHA loan limits by unit count

FHA sets a maximum loan amount for each county, and it rises with the number of units. For case numbers assigned on or after January 1, 2026:

Most counties use the floor amounts; higher-cost areas have limits between the floor and the ceiling. Alaska, Hawaii, Guam, and the U.S. Virgin Islands can go above the national ceiling, but each county there still has its own limit, and some use the floor. Look up your county on HUD's FHA Mortgage Limits page, choosing "FHA Forward" and "CY2026."

Down payment, credit score, and mortgage insurance

• Down payment. With a credit score of 580 or higher, the maximum loan is 96.5 percent of the adjusted value, generally the lower of the purchase price or the appraised value, so the minimum down payment is 3.5 percent. If the appraisal comes in below the price, you pay the difference in cash. With a score from 500 to 579, the maximum is 90 percent, so you need 10 percent down. Below 500, you are not eligible. Lenders may set higher score minimums of their own.
• Upfront mortgage insurance. FHA charges 1.75 percent of the base loan amount at closing. You can pay it in cash or add it to the loan.
• Annual mortgage insurance. On a 30-year loan of $726,200 or less, the annual premium is 0.55 percent of the balance with less than 5 percent down and 0.50 percent with 5 percent or more down. Above $726,200, the rates are 0.75 and 0.70 percent. You pay it monthly.
• How long it lasts. With 10 percent or more down, the annual premium ends after 11 years. With less than 10 percent down, it lasts for the life of the loan.

How rent from the other units helps you qualify

If you have no rental history on the property, the lender adds 75 percent of the expected rent to your income. It uses the lesser of the appraiser's fair market rent or the rent in any existing or signed lease. For a 2 to 4 unit property, the appraiser reports market rents on a small residential income property appraisal (Fannie Mae Form 1025).

The lender cannot instead subtract the rent from your mortgage payment. Adding it to income lowers your debt-to-income ratio less than netting it out would, which matters when you are close to the limit.

The self-sufficiency test and reserves for 3 and 4 units

A 3- or 4-unit property must be self-sufficient: its rent has to cover the full monthly mortgage payment. The lender calculates net self-sufficiency rental income this way:

1. Take the appraiser's fair market rent for all units, including the one you will live in.
2. Subtract the greater of the appraiser's vacancy and maintenance estimate or 25 percent.
3. Compare the result with the monthly payment of principal, interest, taxes, insurance, mortgage insurance, and any HOA dues. The payment cannot be more than the net rent.

The same purchase also needs reserves equal to 3 months of that payment, in your accounts after closing. Equity in another property, cash from a cash-out refinance, and borrowed money do not count. A duplex has no self-sufficiency test.

Worked example: a $600,000 fourplex

Assume 3.5 percent down, a 6.25 percent 30-year rate, taxes of $600 a month, insurance of $250 a month, and market rent of $1,550 per unit.

• Base loan: $600,000 x 96.5% = $579,000
• Upfront premium: $579,000 x 1.75% = $10,132.50, added to the loan for a total of $589,132
• Principal and interest: $3,627.39
• Annual premium: $579,000 x 0.55% / 12 = about $265.38 a month
• Total payment: $3,627.39 + $265.38 + $600 + $250 = $4,742.76
• Net self-sufficiency rent: 4 x $1,550 = $6,200, minus 25% = $4,650

The payment ($4,742.76) is higher than the net rent ($4,650), so this property fails. It would pass at market rent of about $1,581 per unit ($4,742.76 divided by 0.75, divided by 4), or with a lower price or rate. The buyer would also need $14,228.28 in reserves (3 x $4,742.76).

Living there, short-term rentals, and moving out

• Occupancy. You certify that the property will be your principal residence. FHA will not insure a loan it finds was set up to obtain an investment property.
• No rentals under 30 days. For every 2 to 4 unit FHA loan, you sign form HUD-92561, agreeing not to rent any part of the property for less than 30 days, or with hotel services, while FHA insures the loan. That rules out listing the other units as nightly rentals.
• Moving out. After meeting the one-year occupancy intent, you can move out and rent your unit too. The FHA loan stays in place.

The one-FHA-loan rule and its exceptions

FHA will not insure a second principal-residence loan while you still have one, so moving out does not by itself qualify you for another FHA loan. The handbook lists four exceptions:

1. Job relocation. You are moving for work to a new home more than 100 miles from your current one.
2. Larger family. You have more legal dependents, the current home no longer fits, and your loan balance is 75 percent or less of the home's current value, or you pay it down to that level.
3. Leaving a jointly owned home. You are moving out of a home a co-borrower will keep living in.
4. Non-occupying co-borrower. You co-signed someone else's FHA loan without living there and now want your own.

Otherwise, the next purchase needs a different loan type. See down payment requirements for investment properties for conventional minimums, and using VA loans for real estate investment if you have VA eligibility. For deciding whether to live in a multi-unit property at all, see what house hacking is.