A mortgage for rental property usually means an investor loan, and FHA does not offer one. What FHA does offer is a path to owning a 2-4 unit home with as little as 3.5% down, as long as you live in one unit and rent out the others. This approach, often called house hacking, lets a portion of the rent help you qualify and cover the payment.
This guide shows you how to check your eligibility, count rental income the way an underwriter does, price the full monthly cost, and get preapproved. Before you start, gather two years of work history, your recent pay stubs, and a rough idea of the county where you want to buy.
Step 1: Confirm an FHA Loan Fits Your Rental Plan
Quick answer: FHA counts rental income only when you buy a 1-4 unit home and occupy one unit as your primary residence. You must move in within 60 days of closing and intend to stay at least one year. Pure investment properties, where you do not live on site, are not eligible for FHA financing.
The occupancy rule comes from HUD Handbook 4000.1, which is published at hud.gov. Check the current wording there before you commit to a timeline, because HUD updates the handbook periodically. A lender will ask you to sign an occupancy certification at closing, and that statement carries legal weight.
The most common mistake is assuming FHA can buy a rental that is owned purely as an investment. Duane Buziak explains that this falls outside FHA guidelines, and there is no workaround. If you do not plan to live in the property, FHA is the wrong tool.
House hacking means living in one unit of a multi-unit property while tenants in the other units help pay the mortgage. Renting a room in a single-family home is a different situation. Roommate income on a one-unit property generally does not count as qualifying rental income, so do not build your budget around it. Ask the loan officer how a specific property would be treated before you make an offer.
Step 2: Match Your Credit Score to the Right Down Payment
Your credit score sets your minimum down payment under HUD rules:
- 580 or higher: 3.5% down.
- 500 to 579: 10% down.
Individual lenders can set higher minimums than HUD, known as overlays. Many will not go below 580, and some want 620 or more on multi-unit files. That is a main reason to compare options before settling on one. Duane Buziak uses NoTouch Credit Pull, a soft pull with no hard inquiry, so you can see where you stand without a ding.
Down payment funds can come from your own savings, documented gifts from family, and eligible assistance programs. Keep a signed gift letter and the bank statements showing the transfer. Underwriters want to trace where every dollar came from.
Suppose your score is 560 and you are eyeing a $600,000 2-unit. At 10% down you would need $60,000, versus $21,000 at 3.5% down. That is $39,000 more cash. The higher down payment does have one upside: with 10% down, FHA annual mortgage insurance premium (MIP) generally drops off after 11 years, while at 3.5% down it lasts for the life of the loan. Compare that against the cost of waiting a few months while you pay down card balances and raise your score above 580. If the score gap is small, waiting often wins. If it is large, the 10% route may be the faster path.
Avoid new credit inquiries, new accounts, and large unexplained deposits in the 60 days before you apply. A new car loan can change your debt ratio, and an unsourced $5,000 deposit can stall your file while you gather paperwork.
Step 3: Check the 2026 FHA Loan Limit for Your County and Unit Count
FHA loan limits vary by county and by the number of units. These 2026 limits come from HUD Mortgagee Letter 2025-23 and apply to case numbers assigned on or after January 1, 2026. They were verified as of October 2026.
- 2-unit: $693,050 (floor) to $1,599,375 (ceiling).
- 3-unit: $837,700 (floor) to $1,933,200 (ceiling).
- 4-unit: $1,041,125 (floor) to $2,402,625 (ceiling).
Look up your exact county at the HUD limits lookup: entp.hud.gov/idapp/html/hicostlook.cfm. Select the state, choose FHA forward mortgage limits, pick the county, and read the row for your unit count.
Run it for each place you are considering. In Virginia, try Henrico, Chesterfield, and Hanover. Then check a county in each other state where Duane Buziak is licensed, for example Hillsborough in Florida, Davidson in Tennessee, Fulton in Georgia, or the District of Columbia. High-cost areas such as DC sit well above the floor, while many other counties sit at or near it.
Because limits are set per county and per unit count, the same budget can buy different property types in different places. A 4-unit that fits under one county’s limit may exceed another’s. Check before you fall in love with a listing.
Step 4: Estimate How Much Rental Income a Lender Will Count
Lenders typically count about 75% of the appraiser’s market rent for the units you will not occupy. That market rent comes from the appraisal, specifically the rent schedule in the Form 1025 report. The 25% haircut accounts for vacancy and upkeep. Confirm the current percentage in HUD Handbook 4000.1 at hud.gov.
For example, imagine a 2-unit where the appraiser sets market rent for the unit you will rent out at $1,400 per month. The income counted toward your qualifying income is about $1,050 ($1,400 x 0.75). That counted amount helps your debt-to-income ratio. It does not equal the cash you will actually collect.
The self-sufficiency test for 3-4 units
Three- and four-unit properties must also pass FHA’s self-sufficiency test. Net rental income, calculated at 75% of market rent from all units including yours, must cover the full monthly payment of principal, interest, taxes, and insurance (PITI). The mortgage insurance premium is counted as well in most lender calculations, so ask how your file will be tested.
Here is an illustration. A 3-unit appraises with market rent of $1,400 per unit, or $4,200 in total. At 75% that is $3,150. If the PITI is $3,500, the property fails because the rent falls short. The usual causes are a high price relative to local rents, high property taxes, or a county where market rents are low. Fixes include a lower price, a larger down payment to reduce the payment, or choosing a 2-unit instead.
The classic mistake is using your own rent expectations. Maybe the current tenant pays $1,700, or you think a renovated unit will command more. Underwriters use the appraiser’s market rent, not your hopes. Also do not subtract vacancy yourself on top of the 75% factor, since that double counts it. Build your plan around the appraiser’s number and keep a cash reserve for the months a unit sits empty.
Step 5: Calculate the Full Monthly Cost, Including MIP and Property Tax
FHA mortgage insurance has two parts. The upfront premium (UFMIP) is 1.75% of the base loan amount under HUD Mortgagee Letter 2015-01, and most borrowers finance it into the loan. The annual MIP is billed monthly and varies by loan term, loan amount, and loan-to-value (LTV). Annual MIP tiers range from 0.15% to 0.75%. The tier that most 3.5%-down buyers fall into is:
- 0.55% annual MIP: 30-year term, LTV above 95%, base loan up to $726,200 (HUD Mortgagee Letter 2023-05).
Other tiers are in HUD Handbook 4000.1, Appendix 1.0, at hud.gov. Your tier depends on your exact loan, so never assume 0.55% applies to you without checking.
Worked example: a $600,000 Henrico 2-unit
This is an illustration. Rates and insurance are placeholders as of October 2026 and must be replaced with current quotes.
- Price: $600,000. Down payment at 3.5%: $21,000. Base loan: $579,000.
- UFMIP at 1.75%: $10,132.50, financed. Total loan: $589,132.50.
- Principal and interest at an assumed 6.25% over 30 years: about $3,627 per month.
- Annual MIP at 0.55% of $579,000: $3,184.50 per year, or about $265 per month.
- Property tax at Henrico’s $0.85 per $100 (henrico.us, as of October 2026), assuming an assessed value of $600,000: $5,100 per year, or $425 per month.
- Homeowners insurance, placeholder: $175 per month.
The total is about $4,493 per month. Subtract the $1,050 of counted rental income used for qualifying, and the net comes to roughly $3,443. In practice, if the tenant pays the full $1,400, your out-of-pocket housing cost is nearer $3,093.
Compare that with a conventional loan on the same property, and the benefit of FHA is mostly at the front end. A 2-4 unit purchase on a conventional loan generally calls for a notably larger down payment and a stronger credit profile. FHA lets you start with 3.5% and a 580 score.
Step 6: Get Preapproved and Assemble Your Documents
A preapproval should be based on a full review of your file, including the rental income you can count. Gather these:
- Pay stubs covering the most recent 30 days.
- W-2s, or tax returns if you are self-employed, for the past two years.
- Two months of bank statements for every account.
- Signed gift letters and proof of transfer, if family is helping.
- Government-issued photo ID.
Duane Buziak is a mortgage broker, not a lender. That means he can shop your FHA scenario across 500+ wholesale lenders instead of fitting you into one lender’s overlays. His Dare to Compare pricing challenge puts that to work: bring any quote you have, and he will see if it can be beaten. Credit review starts with NoTouch Credit Pull, a soft pull with no hard inquiry.
Licensing matters here. Duane is licensed in Virginia, Florida, Tennessee, Georgia, and DC, and cannot originate loans for properties outside those places. Virginia is his home base. If you are buying in Florida, note that the homestead exemption under Fla. Stat. 196.031 depends on owning and residing in the home as of January 1, so it will not reduce your property tax in the first year. Budget for the full tax bill initially.
Do not shop for properties before you know your preapproval amount with rental income included. Browsing with a number based only on your salary can lead you to overlook workable properties, or to bid on one that fails the underwriting math.
Step 7: Shop, Appraise, Close, and Move In Within 60 Days
Search by unit count and check rent comparables for each listing. Once you have a contract, the lender orders an FHA appraisal with the Form 1025 rent schedule. The appraiser values the property, sets market rent, and checks it against HUD’s minimum property standards.
Health and safety problems must be repaired before closing. Common flags include:
- Peeling or chipping paint on older homes.
- Missing handrails or damaged stairs.
- Roof leaks or worn roofing.
- Exposed wiring or electrical hazards.
- Broken windows or inoperable heating and water systems.
Ask the seller to make repairs in the contract, or negotiate a price adjustment. Plan your move-in date so you occupy a unit within 60 days of closing. Where guidelines allow, seller concessions can cover closing costs, up to 6% of the price under HUD guidelines (verify the current limit). Duane Buziak builds these into no-out-of-pocket closing options when the numbers and contract allow.
After the first year, you may move out and keep the property as a rental. Using FHA again for another home is only allowed under HUD’s rules for multiple FHA loans, which carry exceptions such as relocation. Verify the current rules in HUD Handbook 4000.1 before you plan your next purchase.
Next Move: An FHA Eligibility Review for Your 2-4 Unit Plan
Once you have worked through your occupancy plan, credit tier, county limit, counted rent, and full monthly cost, the next step is having your numbers reviewed against a real file. FHA Mortgages by Duane Buziak offers an FHA eligibility review that checks all five. Ready to take the first step toward homeownership with an FHA loan tailored to your needs? Schedule your free consultation today and discover how our award-winning team can help you navigate the path to your new home with competitive rates and expert guidance.
