How to Buy a Duplex with an FHA Loan 2023

Duplex with an FHA Loan

How to Buy a Duplex with an FHA Loan:

Buying a duplex with an FHA loan can be a strategic move, allowing you to live in one unit and rent out the other, potentially covering your mortgage. In this detailed guide, we’ll explore key aspects of the process, including down payment requirements, using rental income to qualify, and FHA guidelines for 2-4 unit properties.

1. How Much Downpayment Is Required?

When considering an FHA loan for a duplex, the down payment requirement is a crucial factor. Fortunately, FHA loans are known for their low down payment, requiring only 3.5% of the purchase price. This means that, with proper planning, you can enter the real estate market with a relatively small upfront investment.

2. Using Rent to Qualify for an FHA Loan

One unique feature of FHA loans is the ability to use rental income to qualify for the loan. This opens up possibilities for individuals who might not have considered being a landlord.

Here’s an example to illustrate how it functions:

Example Scenario:

Property Type: 2 Unit Duplex

Purchase Price: $575,000

Monthly Rental Income: $2,000

Qualifying Rental Income: $1,500 (75% of $2,000)

By utilizing 75% of the rent from the other unit, you can increase your qualifying income, making it easier to afford a larger loan size.

3. FHA 2-4 Unit Guidelines

FHA loans extend beyond single-family homes to cover 2-4 unit properties. For duplexes, triplexes, and four-plexes, the down payment requirement remains at 3.5%. However, when venturing into larger multi-unit properties, additional guidelines come into play:

Self-Sufficiency Test: For 3-4 unit properties, a self-sufficiency test is applied. This test ensures that the rental income generated covers the Principal, Interest, Taxes, and Insurance (PITI). It’s a measure of the property’s ability to sustain itself financially.

Reserve Requirements: 3-4 unit properties require additional financial stability. Two months’ worth of PITI in liquid reserves, in addition to covering the down payment and closing costs, is mandatory.

Understanding these guidelines is crucial for a successful FHA loan application for multi-unit properties.

FHA Self-Sufficiency Test:

When considering an FHA loan for a duplex, it’s essential to understand the FHA Self-Sufficiency Test. This test evaluates the property’s ability to sustain itself financially, specifically focusing on the Rental Income. The calculation involves deducting the estimated vacancies and maintenance costs or 25% of the fair market rent, whichever is greater, from the appraiser’s estimate of fair market rent for all units.

In simpler terms, the property’s income, after accounting for potential expenses, must cover the Principal, Interest, Taxes, and Insurance (PITI). This test is particularly crucial for 3-4 unit properties, adding an extra layer of financial scrutiny to ensure the property’s long-term viability.

FHA Loan Limits for Duplexes:

Understanding the FHA loan limits is fundamental when considering a duplex purchase. FHA sets maximum loan amounts, varying based on the property type and location. These limits act as a ceiling for the guaranteed loan amount. For duplexes, these limits are influenced by whether the property is in a low-cost or high-cost area.

Example (2022 FHA Lending Limits):

Duplex (Low-cost Area): $538,650

Duplex (High-cost Area): $1,243,050

Being aware of these limits ensures you have a realistic understanding of the financial scope when seeking an FHA loan for a duplex.

FHA Loan for Investment Property:

While FHA loans are generally not intended for investment properties, there are exceptions, especially when it comes to duplexes. You can use an FHA loan for a duplex if you plan to live in one of the units as your primary residence. This unique feature provides an opportunity to step into real estate investment gradually while fulfilling your homeownership goals.

Buying a Duplex as Your First Home – FHA Owner Occupancy Requirement: Living and Investing

One of the distinct features of an FHA loan is the Owner Occupancy Requirement. FHA requires that the property’s owner lives in it for the majority of the year, particularly the unit chosen for occupancy. This means that, if you purchase a duplex, you must reside in one of the units for at least one year. However, after the initial year, you have the flexibility to move out and potentially rent out both units.

Frequently Asked Questions:

Q: Can you use an FHA loan for a duplex?

A: Yes, FHA loans allow you to purchase a duplex, and not just duplexes but also triplexes and fourplexes. The key requirement is that you must live in one of the units as your primary residence.

Q: Can I use an FHA loan to buy a multifamily property?

A: Absolutely. FHA loans extend to multifamily properties, including duplexes, triplexes, and fourplexes. The primary condition is that you intend to occupy one of the units as your main residence.

Q: What is the 75% income rule for FHA loans?

A: The 75% income rule for FHA loans is a unique feature that allows borrowers to use 75% of the rental income from the other units in a multifamily property to qualify for the loan. This means you can factor in a significant portion of the rent you collect when determining your eligibility for the loan.

Q: Can I use an FHA loan for a second home?

A: FHA loans are generally designed for primary residences. Therefore, using an FHA loan for a second home may not align with the intended use. However, FHA loans can be used for multifamily properties, providing an opportunity to live in one unit and rent out the others, potentially turning the property into an investment while still meeting FHA guidelines.


In conclusion, the journey to purchasing a duplex with an FHA loan is a strategic and rewarding endeavor, offering both homeownership and the potential for real estate investment. Navigating the intricacies of FHA loan requirements, from the 75% income rule to multifamily property eligibility, requires expertise and guidance.

Enterprise America stands as your trusted partner in this venture, bringing over a decade of experience to the table. Our commitment is not just to facilitate a transaction but to empower you with knowledge and confidence. As you embark on this exciting chapter of owning a duplex, know that Enterprise America is here to guide you every step of the way.

Your duplex dreams are within reach, and with Enterprise America, turning them into reality becomes a seamless and informed process. Contact us today to embark on your journey towards homeownership and real estate success.

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