An FHA multifamily loan is a valuable tool for buyers interested in owning multifamily properties through the Federal Housing Administration's lending program. Known for their accessibility, these loans provide a practical financing solution for first-time buyers and those with less-than-perfect credit, offering lower down payment requirements and flexible credit standards.
While FHA loans are often associated with single-family homes, they can also be used for multifamily properties like duplexes, triplexes, and fourplexes. This allows buyers to combine homeownership with the potential for rental income, all while benefiting from competitive interest rates and affordable financing terms.
In a nutshell
FHA loans are ideal for purchasing multifamily homes (up to 4 units) with low down payments and flexible credit requirements.
FHA loans are designed for owner-occupiers, meaning you must live in one of the units.
Property types include duplexes, triplexes, and fourplexes.
FHA multifamily loan limits apply depending on the area you’re buying and the property type.
Additional FHA multifamily loan requirements include credit score, debt-to-income ratio, and appraisal conditions.
Who can use an FHA multifamily loan?
If you meet FHA loan requirements, you can use an FHA multifamily loan. “Multifamily” just means that you are purchasing a home with multiple units, which FHA loans are already designed for.
Most notably, anyone who wants to get an FHA multifamily loan should be aware of FHA occupancy rules, which require borrowers to live in one of the purchased property’s units for at least one year.
Eligible Property Types for FHA Multifamily Loans
Additionally, there are limits on how many units you can buy with an FHA multifamily loan. An FHA multifamily loan can purchase properties with up to four units, including duplexes (2 units), triplexes (3 units), and fourplexes (4 units). These types of properties allow buyers to live in one unit while renting out the others, providing the opportunity to generate rental income.
If you want to purchase a property with more than four units, you would need to explore alternative financing options, like a commercial loan.
But, for many buyers, the four-unit limit strikes the perfect balance, offering the opportunity to invest in a multifamily property that can generate rental income while still being manageable for an owner-occupier.
Types of FHA Multifamily Loans
The FHA has several types of loans available for multifamily properties, each serving different needs. These include:
FHA Purchase Loan: This is the standard loan for buying a multifamily property, whether a duplex, triplex, or fourplex. With this loan, you can finance the purchase of the property and move in as an owner-occupier.
FHA Refinance Loan: If you already own a multifamily property and want to refinance your existing loan, the FHA offers options for refinancing that allow you to access better terms or lower interest rates.
FHA 203k Loan: If you need to make improvements to the multifamily property, an FHA 203k loan might be an excellent option. This loan combines the financing for purchasing the property with funds for repairs and renovations.
FHA Multifamily Loan Limits
An FHA loan for multifamily properties follows the general FHA loan limits, which depend on the property’s location and the number of units. These limits, set by the Federal Housing Administration, vary by county and metropolitan area, reflecting local housing markets.
Here are the 2025 FHA loan limits for multifamily properties:
| Property Size | Low-Cost Area Loan Limit | High-Cost Area Loan Limit | Alaska, Hawaii, Guam & Virgin Islands* |
|---|---|---|---|
| Duplex (2 Units) | $671,200 | $1,548,975 | $2,323,450 |
| Triplex (3 Units) | $811,275 | $1,872,225 | $2,808,325 |
| Fourplex (4 Units) | $1,008,300 | $2,326,875 | $3,490,300 |
Since these limits are subject to change based on the local real estate market, it’s important to check your area's specific FHA loan limits. These limits help ensure that FHA loans for multifamily properties remain accessible to borrowers while staying in tune with the local housing market.
Other FHA Multifamily Loan Requirements
In addition to the FHA multifamily loan limits, borrowers must meet several other FHA multifamily loan requirements. A critical requirement is a minimum credit score of 580, although some lenders may set more stringent standards.
Another essential factor is the debt-to-income ratio (DTI). FHA loan DTI requirements are flexible, however, lenders prefer a ratio below 43%.
Furthermore, FHA borrowers are expected to demonstrate stable and sufficient income that can cover both the mortgage payment and any other existing debts.
As previously mentioned, the occupancy rule is vital—borrowers must occupy one of the units as their primary residence. This ensures that FHA multifamily loans are used for homeownership, not just as an investment strategy.
Additionally, an appraisal is required for all FHA loans to verify that the property meets FHA standards and is worth the home sale price. One of the significant advantages of the FHA program is its flexibility. It offers a more accessible pathway to homeownership, especially for those with lower credit scores or limited savings. This makes the FHA multifamily loan program a valuable option for individuals who might not meet the rigorous requirements of conventional financing.
How an FHA Multifamily Loan Works
Managing an FHA multifamily property is relatively straightforward, especially for owner-occupiers who want to balance homeownership with generating rental income. Here’s a closer look at how the process works:
Steps for Managing Your FHA Multifamily Property
Primary Residency: As an owner-occupier, you are required to live in one of the units as your primary residence for at least one year to ensure that the property isn’t used purely for investment purposes, which is a key FHA requirement.
Renting Out Other Units: One of the major perks of an FHA multifamily loan is the opportunity to rent out the remaining units. Whether it’s a duplex, triplex, or fourplex, you can generate rental income from these units to help offset your mortgage payments.
Acting as the Landlord: As the property owner, you essentially wear two hats: not only do you live in one of the units, but you also act as the landlord for the other tenants. Of course, you can outsource the role by hiring someone else, but ultimately, you’ll need to manage maintenance issues, enforce rental agreements, and ensure the property remains in good condition.
Owning a multifamily property through an FHA multifamily loan offers a unique opportunity to live in one unit while earning rental income from the others. However, it’s important to keep in mind the responsibilities that come with being an owner and a landlord, as well as the occupancy requirements that ensure you're meeting FHA guidelines.
With these in mind, you can turn your multifamily property into a smart investment while enjoying the benefits of homeownership.
Pros and Cons of FHA Multifamily Loans
Here's a quick look at the pros and cons of FHA multifamily loans to help you decide if this financing option is right for you:
| Pros | Cons |
|---|---|
| Lower down payments (as low as 3.5%) | Mortgage insurance premiums required |
| More lenient credit requirements | Loan limits may be lower than needed for larger properties |
| Ability to generate rental income | Occupancy requirements (must live in one unit) |
| Flexible loan options (purchase, refinance, 203k) | Strict property condition requirements |
Overall, FHA multifamily loans offer an accessible path to both homeownership and property investment, especially for those with modest savings or lower credit scores. By allowing you to live in one unit while renting out others, these loans can help offset your housing costs and build long-term wealth. Just keep in mind the responsibilities that come with managing tenants and maintaining the property, as well as the need to meet FHA’s occupancy and condition requirements.
If you're ready to take your first step toward owning a multifamily home, check your eligibility today!
Emily Kittle is an experienced underwriter with a strong background in risk assessment, training, and loan decision-making. She excels at solving complex mortgage challenges and guiding loans to closing using creativity and critical thinking.
