FHA Loan Investment Property:
What's Actually Allowed (and What's Not)
If you've been searching for information on using an FHA loan for investment property, you're probably hoping to buy a rental with a low down payment. The idea makes sense — FHA loans offer some of the most accessible financing available. But here's what you need to know upfront: FHA does not allow loans on investment properties. The program is designed for primary residences only.
That said, there's a real and perfectly legitimate way to buy property with an FHA loan, collect rental income, and start building a real estate portfolio. It's called house hacking, and it works within FHA's rules. Here's how.
Why FHA Loans Can't Be Used for Investment Properties
The Federal Housing Administration was created to help people become homeowners — not investors. According to HUD's FHA guidelines, the property financed must be the borrower's primary residence. You need to move in within 60 days of closing and live there as your main home.
This rule exists because the government is backing these loans. FHA mortgage insurance protects lenders against default, which is what makes low down payments possible. That protection comes with the condition that you're buying a home to live in, not a property to flip or rent out entirely.
If a lender discovers that you took out an FHA loan with no intention of living in the property, that's considered occupancy fraud — a serious federal offense. This isn't a gray area.
What FHA Does Allow: Owner-Occupied Multifamily Properties
Here's where things get more interesting. While FHA won't finance a standalone rental, it will finance properties with up to four units — as long as you live in one of them. That means you can buy a duplex, triplex, or fourplex with an FHA loan, occupy one unit as your primary residence, and rent out the remaining units.
This is fully within FHA rules. You're still meeting the owner-occupancy requirement, and the rental income from the other units can even help you qualify for the loan.
The key rule: You must live in one of the units as your primary residence. The other units (one, two, or three of them) can be rented to tenants. You need to move in within 60 days and maintain it as your primary home for at least 12 months.
What Is House Hacking?
House hacking is a straightforward concept: you buy a multifamily property, live in one unit, and rent out the others. The rental income offsets your mortgage payment — sometimes significantly.
The term has become popular in real estate circles over the past decade, but the strategy itself is nothing new. People have been buying duplexes and living in half for generations. What makes it especially appealing today is that FHA financing makes the entry point much lower than most people assume.
Why FHA is a common choice for house hacking
With a conventional loan, buying a multifamily investment property typically requires 15-25% down and strong reserves. FHA changes the math. According to FHA requirements, borrowers with a credit score of 580 or higher can put down just 3.5% — even on a 2-4 unit property. That's the same down payment percentage as a single-family FHA loan.
This means someone buying a $400,000 duplex could potentially get in with a $14,000 down payment instead of $60,000-$100,000. The difference is significant for most buyers.
FHA Loan Limits for Multifamily Properties
FHA loan limits increase with the number of units. This reflects the higher cost of multifamily buildings. The limits vary by county, but here are the baseline (floor) and high-cost area limits for 2025, as published by FHFA:
| Property Type | Standard Area Limit | High-Cost Area Limit |
|---|---|---|
| 1-Unit | $524,225 | $1,209,750 |
| 2-Unit (Duplex) | $671,200 | $1,548,975 |
| 3-Unit (Triplex) | $811,275 | $1,872,225 |
| 4-Unit (Fourplex) | $1,008,300 | $2,326,875 |
[Note: Loan limits are updated annually. Verify current limits for your specific county, as some areas fall between the floor and ceiling amounts. Colorado and Florida both have counties at varying limit levels.]
If you're in Colorado or Florida and wondering how these limits apply to your area, a mortgage loan program comparison can help you see what fits your situation.
How Rental Income Helps You Qualify
One of the practical advantages of buying a 2-4 unit property with FHA is that you can use projected rental income from the other units to help meet qualification requirements. This is a big deal, because multifamily properties carry larger loan amounts, and the rental income can offset that.
How it works
The lender orders an appraisal that includes a rental analysis. The appraiser estimates fair market rent for each unit. FHA then allows you to count 75% of that projected rental income toward your qualifying income. The 25% reduction accounts for potential vacancies and maintenance costs.
For example, if an appraiser determines the second unit of a duplex could rent for $1,600/month, $1,200 of that (75%) could be factored into your debt-to-income ratio. That extra income can make a real difference in what you qualify for.
Self-sufficiency test for 3-4 unit properties
If you're buying a triplex or fourplex, FHA applies a self-sufficiency test. The total rental income from all units (including the one you'll live in, based on comparable rents) must cover the full mortgage payment. If the property doesn't pass this test, FHA won't approve the loan — regardless of your personal income.
A Realistic House Hacking Scenario
Here's what house hacking with an FHA loan might look like in practice. This is a simplified example to show the financial picture — your actual numbers will depend on your location, credit profile, and the specific property.
| Item | Amount |
|---|---|
| Purchase Price | $380,000 |
| Down Payment (3.5%) | $13,300 |
| Loan Amount | $366,700 |
| Monthly Principal & Interest (6.5% rate, 30-year) | $2,318 |
| Property Taxes (est.) | $320 |
| Homeowners Insurance (est.) | $165 |
| FHA Mortgage Insurance (MIP) | $253 |
| Total Monthly Payment | $3,056 |
| Rental Income from Unit 2 | −$1,500 |
| Your Net Housing Cost | $1,556/month |
In this example, the rental income cuts the owner's housing cost nearly in half. And that $1,556 is going toward a property that builds equity — not disappearing into someone else's rent payment. You can run your own numbers with our mortgage calculator to get a rough estimate for different price points.
Keep in mind: you'll also need to budget for maintenance, potential vacancies, and the upfront FHA mortgage insurance premium (1.75% of the loan amount, which can be rolled into the loan). These are real costs that shouldn't be ignored.
The 12-Month Rule and What Happens After
FHA requires you to occupy the property as your primary residence for at least 12 months. After that, your options open up.
If you decide to move — for work, a growing family, or any other reason — you can keep the property and rent out all the units, including the one you were living in. Your FHA loan stays in place. You don't need to refinance just because you moved out after meeting the occupancy requirement.
Some house hackers repeat this process: live in a multifamily property for a year, move to the next one (possibly with another owner-occupied loan), and gradually build a small rental portfolio. It's a slow approach, but it's a path that works within the rules.
What you can't do
You can't buy a property with FHA, never move in, and rent it from day one. You also can't buy a second FHA-financed property while still owning the first one, except in limited circumstances (such as relocating for work beyond a reasonable commuting distance). Having two active FHA loans at once isn't standard.
FHA vs. Conventional for Multifamily: Quick Comparison
FHA isn't the only option for buying a 2-4 unit property. Here's how it compares to a conventional owner-occupied multifamily loan:
| Factor | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Down Payment (2-4 units) | 3.5% | 15–25% |
| Credit Score Minimum | 580 (3.5% down); 500 (10% down) | Typically 620–680+ |
| Mortgage Insurance | Required for life of loan (most cases) | Removable at 80% LTV |
| Rental Income for Qualifying | 75% of projected rent | 75% of projected rent |
| Self-Sufficiency Test (3-4 units) | Yes | No |
| Property Condition Requirements | Stricter (FHA standards) | Less strict |
FHA's lower down payment is the big draw, but the trade-off is mortgage insurance that sticks around for the life of the loan in most cases. According to the Consumer Financial Protection Bureau (CFPB), understanding how down payment size affects your overall loan cost is one of the most impactful steps you can take before buying. For some borrowers, the lower upfront cost of FHA makes sense even with the ongoing MIP. For others — especially those with strong credit and more savings — conventional may be the better long-term value.
Wondering What Down Payment You'd Actually Need?
The right program depends on your credit, savings, and the type of property you're considering. We put together a clear breakdown of what's available — including FHA, conventional, and other options for multifamily buyers.
Explore Down Payment OptionsIs House Hacking with FHA Right for You?
House hacking isn't for everyone. Being a landlord means dealing with tenants, maintenance calls, and the occasional vacancy. Living next door to (or in the same building as) your tenants can blur the line between personal space and business responsibility.
But for people who are comfortable with that trade-off, the financial math can be compelling. Reducing your housing costs while building equity in a property that generates income is a real advantage — especially early in your financial life.
If you're thinking about this path, start with a clear picture of what you can afford and what a realistic rental income looks like in your target area. Talk to a lender who understands multifamily FHA financing before you start shopping. The qualification process for 2-4 unit properties has more moving parts than a single-family purchase, and knowing your numbers early saves you time.
Frequently Asked Questions
No. FHA loans require owner-occupancy, so you can't buy a property solely as a rental investment. However, you can buy a 2-4 unit property with FHA, live in one unit, and rent out the others. This is the only way to collect rental income on an FHA-financed property while staying within program rules.
FHA requires you to occupy the property as your primary residence for at least 12 months after closing. You also need to move in within 60 days of closing. After the 12-month period, you're free to move out and rent all units if you choose — the FHA loan can remain in place.
Yes. Lenders can count 75% of the projected rental income from the other units (as determined by the appraisal) toward your qualifying income. This helps offset the higher loan amounts that come with multifamily properties and can make a meaningful difference in your debt-to-income ratio.
The minimum down payment is 3.5% of the purchase price with a credit score of 580 or higher — the same requirement as a single-family FHA loan. With a credit score between 500 and 579, the minimum increases to 10%. This applies to 2-unit, 3-unit, and 4-unit properties alike.
In most cases, no. FHA generally limits borrowers to one FHA loan at a time. There are exceptions — such as relocating for employment beyond a reasonable commuting distance or outgrowing a property due to family size — but these require documentation and lender approval. It's not something you can plan on as a default strategy.