2 to 4 Unit Multi-Family Residential Property Mortgage Loans Illinois

This ARTICLE On 2 to 4 Unit Multi-Family Residential Property Mortgage Loans Illinois Was UPDATED On May 29, 2017

FHA allows 2 to 4 Unit Multi-Family Residential Property Mortgage Loans Illinois with 3.5% down. However, it only applies for owner occupant multi-family residential property and cannot be second homes or investment properties.

  • Illinois home buyers can purchase 2 to 4 unit multi-family residential property with a FHA insured mortgage loan,
  • FHA allows owner occupant home buyers to purchase 2 to 4 Unit Multi-Family Residential Property Mortgage Loans Illinois with 3.5% down payment.
  • One of the units need to be the primary home of the multi-family property owner and the remainder residential units can be rented out.

What Classifies Multi-Family Residential Property Under FHA Guidelines

Any residential multi-family residential property under HUD Guidelines is a two to four unit property that is zoned residential with no commercial space. If a property has commercial space, it is classified as mix-use and it would not be eligible for FHA Loans.

Here Are Common FAQ On 2 To 4 Unit Mortgage Loans

  • A common question I get asked by multi-family residential property home buyers is if they need to be full time occupants of the property. 
  • The answer to that question is a definite yes. 
  • FHA requires that the owner need to occupy the 2 to 4 unit property for at least a year.
  • After one year, the owner of the multi-family property can qualify for another owner occupant Conventional Loan but cannot be a multi-family residential property.
  • A multi-family residential property owner can qualify for another owner occupant home in one year but needs to be a single family home.
  • A single family home owner cannot qualify for a multi-family residential property as a primary residence.
  • The mission of HUD, the parent of FHA, is to make housing affordable to all Americans with less than perfect credit, higher debt to income ratios, and low down payment. 
  • They are only available to owner occupied residential units and not second homes or investment properties. 
  • Home buyers who are intending on purchasing 2 to 4 unit multi family residential property and do not intend on living there and renting out all of the four units would not qualify for the FHA multi family residential property mortgage.

Can Rental Income Be Used On Proposed Multi-Family Residential Property

The great news for two to four unit home buyers is that they can live in one of the units and rent out the remaining units. FHA allows 85% of the potential rental income on the rental units to be used as qualified income when lenders calculate borrowers debt to income ratios. The potential rental income figure is provided by the home appraiser.

  • Home buyers of multi-unit properties who intend on living in one of the apartments and renting the other units out for at least a year and intend on vacating the property and converting all of them as rental units, it is allowed.
  • FHA requires for owners of multi-unit properties to live in one of the units for at least a one year period. 
  • Circumstances change and FHA realize that and if the property vacates the multi-unit prior to the one year, that will be fine.
  • The four unit multi- family residential property owner might decide move out of the multi- family residential property due to needing more space and if that is the case, they can qualify for another owner occupant conventional mortgage.
  • FHA borrowers will not be in violation of the FHA mortgage loan terms and conditions of HUD if they need to move out of their multi-family residential property after they purchase it due to them needing more space due to having a new baby on the way or other extenuating circumstances.

FHA Down Payment Requirements On Multi-Family Residential Property

  • Buying a multi-family residential property via the FHA mortgage loan program with only 3.5% down is a great way of being a homeowner and a property investor at the same time. 
  • The rental units on a multi- family residential property can be used to qualify for income. 
  • For FHA loans, 85% of the market rents can be used for debt to income ratios income. 
  • For conventional loans, 75% of the potential rental income can be used to qualify as income towards the debt to income ratios. 
  • For conventional loans, a 15% down payment is required for an owner occupant two to four unit multi -family residential property purchase. 
  • Borrowers of 2 to 4 unit multi family residential property requires reserves of principal, interest, taxes, and income.

Buyers of multi-family residential property can contact The Gustan Cho Team to qualify for a FHA 2 to 4 unit mortgage loan with 3.5% down payment at 800-900-8569 or text Gustan Cho on his cell at 262-716-8151 or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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