An FHA loan lets you house-hack a 2-4 unit property with just 3.5% down at a 580 credit score or better, provided you live in one of the units. Per HUD Handbook 4000.1, the same 3.5% down payment and owner-occupancy rules that apply to a single-family home also apply to a duplex, triplex, or fourplex.
| Cost of getting in | FHA loan at 3.5% down | Conventional at 20% down |
|---|---|---|
| Down payment on a $470,000 duplex | $16,450 | $94,000 |
| Share of the purchase price | 3.5% | 20% |
Not sure what house hacking is yet? Start with the full plain-English guide.
How a near-broke former van-dweller bought a $470,000 building with $16,450.
The single biggest thing standing between most people and real estate is the down payment. The reason I own a duplex today is that I found the door with the lowest bar to clear: an FHA loan on an owner-occupied small multi. Here’s exactly how it works.
FHA down payment for a 1 to 4 unit property
FHA loans let an owner-occupant buy a 1–4 unit property with as little as 3.5% down. On my $470,000 duplex, that was $16,450, not $94,000, which is what a 20% conventional down payment would’ve cost. The seller covered closing costs, so my total cash to close was about $16,450.
That’s the whole magic trick. A small multi, financed like a home, because you’re going to live in one of the units.
FHA loan requirements for house hacking a multifamily
FHA’s gift comes with conditions. The big ones:
- You must live there. Owner-occupied means you move in (generally within 60 days) and stay at least a year. This isn’t a loophole for absentee investors, it’s a deal because you live in it.
- 1–4 units only. Duplex, triplex, fourplex. Five or more units is commercial financing, a different world.
- The self-sufficiency test (3–4 units). For triplexes and fourplexes, FHA requires the property’s rents to cover the payment: the appraiser’s market rent for all units, less the greater of the appraiser’s vacancy-and-maintenance factor or 25%, must cover the full payment with taxes, insurance and MIP (HUD Handbook 4000.1). Duplexes are exempt, which is part of why a duplex is the friendliest starting point.
- Reserves on 3–4 units. FHA wants three months of the full payment in the bank after closing on a triplex or fourplex (one month on a duplex if the loan is manually underwritten; none on an automated approval). On a $3,100 payment that is $9,300 you show, separate from the down payment and closing costs.
- Mortgage insurance. This is the cost of the low down payment, and it’s real.
How long FHA mortgage insurance premiums last
On an FHA loan with less than 10% down, you pay a monthly mortgage insurance premium (MIP), mine is about $312/month, and on FHA loans it generally lasts the life of the loan. There’s also a one-time upfront premium (1.75%) you can roll into the balance.
For me, the MIP was the right trade. It bought me time in the market I couldn’t otherwise afford.
I want to be straight about this: that $312 a month is annoying, and over years it adds up. But the alternative was waiting years to save a 20% conventional down payment while prices climbed faster than I could save. When you build enough equity, you can refinance out of FHA into a conventional loan and drop it.
Buying with FHA now vs saving for 20 percent down
A lot of people decide to “save up and do it right” with 20% down. In a rising market, that often means renting for five extra years and buying a smaller asset later. FHA let me start with $16,450 and let the building, and my tenants, do the rest.
Run a real listing through the calculator with 3.5% down and today’s rates. The MIP is in there. So is the reason the deal still works.
An FHA loan lets you house-hack a 2-4 unit property with just 3.5% down at a 580 credit score or better, provided you live in one of the units.
One more tool worth bookmarking: before you get into the house-hacking layer, it helps to see the plain mortgage math on its own. Calcuja’s free mortgage calculator shows the monthly payment, total interest, and a full amortization schedule, with no signup. Then run the same listing through my calculator to see what the second unit’s rent does to it.
Wondering if FHA fits your situation? Ask me. Pull live rates first: they move weekly.
The FHA loan is the financing half. The buying process itself is in how to buy a duplex and live in one side.
Related: What credit score do you need to buy a house?
If you are weighing 3.5% against putting nothing down at all, two programs finance the whole price and neither is open to everyone.
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Sources
- U.S. Department of Housing and Urban Development, Single Family Housing Policy Handbook 4000.1. The rule book behind the 3.5% minimum down payment, the owner occupancy requirement, and the self sufficiency test that applies to three and four unit properties.
- U.S. Department of Housing and Urban Development, FHA Mortgage Limits. County by county limits, listed separately for one, two, three and four unit properties, which is why a duplex can be financed this way at all.
- Consumer Financial Protection Bureau, What is mortgage insurance and how does it work? Plain language on what the premium pays for and who it protects.
Frequently asked questions
Can you buy a duplex with an FHA loan?
Yes. An FHA loan is defined as government insured financing for an owner occupant buying a one to four unit property, so a duplex, triplex or fourplex qualifies as long as you live in one of the units. That is the loan I used to buy my building.
How much do you need down on a duplex with an FHA loan?
The FHA minimum down payment is defined as 3.5% of the purchase price on a one to four unit property bought by an owner occupant. On my $470,000 duplex that came to $16,450, against the $94,000 a 20% conventional down payment would have cost.
How long does FHA mortgage insurance last?
FHA mortgage insurance premium, or MIP, is defined as the charge that pays for the government insurance sitting behind the loan. With less than 10% down it generally lasts the life of the loan, and there is also a one time upfront premium of 1.75% you can roll into the balance. Mine runs about $312 a month.
What is the FHA self-sufficiency test?
The FHA self sufficiency test is defined as a requirement that the rents on a three or four unit property cover the mortgage payment: the appraiser’s market rent for all units, less the greater of the appraiser’s vacancy and maintenance factor or 25%, must cover the full payment. Duplexes are exempt from it, which is one reason a two unit building is the friendliest place to start.
An FHA down payment is already small, and assistance can shrink it further if your metro runs a program that permits a second unit. I checked which ones do in the down payment assistance survey.
See what this looks like on a building you could actually buy.
The free house hacking calculator. Put in a price, a rent and your loan terms, and it returns your monthly cost with the tenant rent counted.