A terrific way for home buyer to utilize FHA home loans is to purchase a 2-4 unit property where the FHA borrower occupies one of the units as their primary residence. FHA home loans are very unique in that they allow a FHA borrower to buy a 2 unit property with only 3% down payment and a 3-4 unit property with 15% down payment if they plan to occupy one of the units as their primary residence! This is extraordinary. Yes you heard it correctly, you could buy a 2 unit unit building and put only 3% down.
Benefits of purchasing 2-4 units as a primary residence
There can be some really great benefits to using FHA home loans to purchase a 2-4 unit property vs. a single-family home. The most obvious benefit is that you will receive the rent from the other units to help offset your own housing payment. In fact over time, you could get to the point where the rent from the other units pay the ENTIRE housing payment and you live without a housing payment! Imagine what it could do for your budget if you did not have a house payment. And even better, the rents from the other units could not only one day pay the entire housing payment on the property, but they could also give you additional income on top of that. Now if you were to buy a condo or single-family home, you have to make the entire housing payment yourself. You would not have rents from other units.
In addition, you could one day move out of your 2-4 unit property to move up to a nice primary residence and retain the 2-4 unit property as an investment for life. Over time this property would appreciate in value and also provide you with cash flow for your retirement.
Using the rents from the other units to help you qualify
A wonderful aspect of using FHA home loans to buy a 2-4 unit property is that you can use the rental income from the other units to help you qualify for the FHA loan. For example, if you were to buy a 4 unit property where the 3 units you would be renting would bring in $1,000/mo income each, you could use 90% of that $3,000 in rental income to help you qualify for the loan. This can enable a FHA loan borrower to qualify to buy when if they were to buy a condo or home without rental income they would not qualify.
So as you can see, using your FHA home loan benefits can be an outstanding way to buy your primary residence and also provide you with a tremendous investment for your entire life.
If you want to learn more, please contact Rob our Sr. FHA loan specialist using the contact info below.
Sr. Loan Officer and FHA mortgage specialist