Financing Your First House Hack: FHA, VA, and Conventional Loans

A first house hack on a 2-4 unit home you will live in can be financed with an FHA loan at 3.5% down (580 credit score or higher), a conventional loan at 5% down under Fannie Mae's rules, or a VA loan at 0% down if you are an eligible service member or veteran. All three are owner-occupied loans, so you must move into one of the units. The right choice depends on your credit score, your cash, whether you qualify for VA, and whether the building needs work.

House hacking means living in one unit and renting the others; see the full house hacking guide for how the strategy works.

FHA, conventional, and VA side by side

Loan-to-value (LTV) is the loan amount divided by the home's price or appraised value, whichever is lower. At 5% down, LTV is 95%.

Loan limits rise with the number of units. For 2026:

Your county's FHA limit falls between the floor and the ceiling. Conventional loans above the baseline in high-cost counties are "high-balance" loans, and Fannie Mae caps those at 85% LTV for two units and 75% for three or four, so the 5% down option does not apply.

Using an FHA loan to house hack

FHA accepts a 580 score for 3.5% down, and it does not require an automated approval to reach that down payment. The FHA rules that matter most for a house hack:

• Occupancy. At least one borrower must move in within 60 days of closing and intend to live there for at least one year.
• One FHA loan at a time. FHA generally will not insure a second principal residence for you while you have an FHA loan. The exceptions are a job relocation of more than 100 miles, a larger family when the current home's loan is at or below 75% of its value, leaving a home that a co-borrower keeps living in, and having been only a non-occupying co-borrower. FHA also refuses loans it finds were set up to collect investment properties.
• Mortgage insurance. You pay 1.75% of the base loan upfront (usually added to the loan) plus an annual premium billed monthly. With 3.5% down on a loan of $726,200 or less, the annual rate is 0.55% and it lasts for the life of the loan. With at least 10% down it drops to 0.50% for 11 years.
• No nightly rentals. On a 2-4 unit home, or a one-unit home with an accessory dwelling unit, you sign form HUD-92561, agreeing not to rent any part of the property for less than 30 days while the FHA loan is in place.
• Three and four units. These must pass a self-sufficiency test: 75% of the appraiser's market rent for all units, including yours (less, if the appraiser's vacancy and maintenance estimate is above 25%), must cover the full payment of principal, interest, taxes, and insurance (PITI). You also need 3 months of PITI in reserves after closing.

Example, a $500,000 duplex: 3.5% down is $17,500, the base loan is $482,500, the upfront premium is $8,444, and the annual premium is about $221 a month in the first year ($482,500 x 0.55% / 12).

Example, a $700,000 fourplex at an assumed 6.25% rate, with assumed taxes and insurance: the loan with the upfront premium is $687,321, so principal and interest are about $4,232 a month. Add $700 in taxes, $300 in insurance, and $310 in mortgage insurance for a PITI of $5,542. If each unit rents for $1,500, 75% of $6,000 is $4,500, which is less than $5,542, so the property fails. It would need about $7,389 in total market rent ($5,542 / 0.75) to pass, or more if the appraiser's vacancy and maintenance estimate exceeds 25%.

How the lender counts the rent from the other units on a duplex is covered in our guide to calculating rental income for house hacking. For more on FHA multifamily rules, see FHA loans for owner-occupied multi-family properties.

Conventional loans with 5% down on 2-4 units

Fannie Mae's automated underwriting system, Desktop Underwriter (DU), allows 95% LTV on a 2-4 unit principal residence purchase, so 5% down works on a duplex, triplex, or fourplex within the baseline limit. A manually underwritten loan is capped at 85% LTV for two units and 75% for three or four, with minimum scores of 640 to 700 depending on units, LTV, and debt ratio.

Conditions that change the plan:

• Your own 5%. For a 2-4 unit principal residence above 80% LTV, Fannie Mae requires the 5% minimum contribution to come from your own funds. Gifts can cover costs beyond that.
• Reserves. DU requires six months of reserves for a 2-4 unit principal residence: savings or other eligible assets left over after the down payment and closing costs.
• PMI. On a 2-4 unit principal residence, Fannie Mae's servicing rules let you end mortgage insurance once the balance reaches 70% of the home's original value, if you ask and meet its payment-history and value requirements. After two years, you can also ask based on current value if a new valuation shows 70% or less. Otherwise it ends at the midpoint of the loan term if you are current. FHA's life-of-loan premium at 3.5% down does not end either way.
• Seller credits. At more than 90% LTV, Fannie Mae limits seller and other interested-party contributions to 3% of the price.

Conventional financing on property you will not live in is a different product with larger down payments; see conventional loans for investment property.

VA loans for eligible borrowers

VA-backed purchase loans can finance a home of up to 4 units with no down payment when the price does not exceed the appraised value, and they carry no PMI or monthly mortgage insurance. You must live in the home and meet VA's and the lender's credit and income standards. The funding fee, the reserves VA lenders require before counting rent, and how entitlement works for a second purchase are covered in house hacking with a VA loan.

Renovation loans when a unit needs work

If a unit is not rentable today, you can finance the purchase and repairs in one loan:

• FHA Standard 203(k): for larger remodeling and repair projects, including work beyond the Limited program's scope. The minimum repair cost is $5,000, and a 203(k) Consultant is required.
• FHA Limited 203(k): for minor, nonstructural repairs up to $75,000 in total rehabilitation costs. No consultant is required.
• Fannie Mae HomeStyle Renovation: allowed on a 1-4 unit principal residence. Renovation costs cannot exceed 75% of the lesser of the purchase price plus renovation costs or the as-completed appraised value, and the 2-4 unit maximum LTV is 95%.

Where the down payment and closing costs can come from

• Gifts. FHA accepts gifts from a family member, your employer or labor union, a close friend with a documented interest in you, a charitable organization, or a government agency with a homeownership program. Fannie Mae accepts gifts from relatives and people with a family-like relationship, subject to the 5% own-funds rule on 2-4 units.
• Down payment assistance. State housing finance agencies and some cities offer grants or second loans to first-time buyers. Ask each program whether it allows 2-4 unit properties and which loan types it pairs with.
• Seller concessions. FHA lets the seller and other interested parties pay up to 6% of the price toward origination fees, closing costs, prepaid items, and discount points. These credits cannot fund your down payment.

Get a Loan Estimate for each loan type from at least two lenders on the same day and compare the cash to close, the monthly payment including mortgage insurance, and the total insurance cost over the years you expect to keep the loan.