Contrary to popular belief, FHA rules do not require someone to be a first-time home buyer and you can also buy income property up to 4-units with an FHA loan in California.
FHA loan limits are higher in Claremont, CA Los Angeles County than they are in Upland, CA in San Bernardino County, but in all cases the FHA loan limits increase per unit versus single-family homes.
The borrower must live in one of the units but may rent out the others and use the projected rent as income to qualify for the loan. A duplex versus 3- or 4-units has a slightly different qualifying formula, but all 2-4 unit properties can still be purchased with as little as 3.5% downpayment.
FAQ
Q: How much of the rent can a borrower count towards income?
A: The borrower can use 90% of the appraiser-verified projected rental income as their own income in terms of the qualifying formulas.
Q. Why do 3 or 4 units have a different formula?
A: These properties are considered income properties. Therefore, FHA guidelines require the property to be treated as a “business.” The rental income from the tenant units must be sufficient to cover the new mortgage payments. If the rent collected cannot cover (service) the payments, the borrower must bring in enough down payment (investment) to lower the mortgage amount to achieve “debt service.”
Q: Can I charge a family member rent to live in one of the units?
A: Of course, as long as they are not on the loan.
Please feel free to contact me with more questions about FHA loans, gift money, or an Upland, California mortgage.
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Brian Wiesner
Toll Free: 866-343-1579
Direct: 909-581-4075
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