how-to-finance-multiple-properties)

House hacking — living in one unit of a multifamily property while renting out the others — is widely considered the single best way for first-time investors to enter real estate. But when you combine it with an FHA loan, the strategy becomes even more powerful: you can purchase a 2–4 unit property with as little as 3.5% down, offset much or all of your mortgage payment with rental income, and begin building a real estate portfolio before most of your peers have saved a down payment.

This guide covers the complete FHA house hacking strategy: how FHA financing works for multifamily, how to qualify, how to find and analyze deals, and how to transition the strategy into a growing portfolio.

Why FHA + House Hacking Is Such a Powerful Combination

Let's start with the numbers that make this strategy compelling.

Conventional investment property purchase:

2-unit property: 15–25% down required
3–4 unit property: 25% down required
Personal income verification required
No rental income counted until you've had it for 1–2 years

[FHA house hack](/blog/best-cities-for-house-hacking-2026):

2–4 unit property: 3.5% down (with 580+ credit score)
10% down (with 500–579 credit score)
Future rental income from the other units can be counted to help you qualify
Owner-occupancy required (you must live there)

The practical difference: On a $400,000 fourplex:

Conventional investment: $100,000 down (25%)
FHA house hack: $14,000 down (3.5%)

That $86,000 difference is enormous. It's the difference between years of saving and entering the market today. And while you're living there with a reduced (or zero) housing payment, you're accumulating the savings and equity to fund your next deal.

How FHA Loans Work for Multifamily Properties

The Owner-Occupancy Requirement

FHA loans are designed for primary residences only. For house hacking to work, you must genuinely intend to live in one of the units as your primary residence. The FHA requires:

Move in within 60 days of closing
Live in the property for at least 12 months
The property must be your primary residence — not a vacation home or investment property

This requirement is enforced. FHA lenders and the agency take occupancy fraud seriously. If you indicate intent to occupy but immediately rent all units, you've committed mortgage fraud, which is a federal crime.

The good news: after 12 months of living there, you can move out, rent all units, and keep the loan in place as an investment property. Most investors rinse and repeat: move to a new house hack after year one, leaving the original property fully rented.

What Properties Qualify

FHA loans can finance 1–4 unit residential properties. For house hacking purposes, you want 2–4 units:

Duplex: 2 units — you live in one, rent one
Triplex: 3 units — you live in one, rent two
Fourplex: 4 units — you live in one, rent three

5+ unit properties do not qualify for FHA — they're classified as commercial real estate and require commercial financing.

FHA Loan Limits for Multifamily (2026)

FHA loan limits vary by county. Higher-cost areas have higher limits. For 2026:

Units	Low-Cost Area	High-Cost Area (e.g., CA, NY)
1 unit	$524,225	$1,209,750
2 units	$671,200	$1,548,975
3 units	$811,275	$1,872,225
4 units	$1,008,300	$2,325,000

Check current FHA limits for your county at HUD's FHA loan limits page.

These limits are often higher than people expect — especially in multifamily. A fourplex priced up to $1,008,300 (in most markets) can be purchased with 3.5% down.

FHA MIP: The Cost of Low Down Payments

FHA loans require Mortgage Insurance Premium (MIP), which comes in two parts:

Upfront MIP: 1.75% of loan amount, paid at closing (can be rolled into the loan)
Annual MIP: 0.55% of outstanding loan balance for most borrowers (as of 2026), paid monthly

Example on a $400,000 property with 3.5% down:

Loan amount: $386,000
Upfront MIP: $6,755 (rolled into loan)
Monthly MIP: ~$179/month

Unlike PMI on conventional loans, FHA MIP does not automatically cancel based on equity once the down payment was below 10%. For most FHA loans originated with less than 10% down, MIP lasts the life of the loan.

This means there's an ongoing cost to the FHA strategy. Many investors plan to refinance out of FHA into a conventional or DSCR loan once they have 20–25% equity, eliminating MIP.

Qualifying for an FHA Loan to House Hack

Credit Score Requirements

580+: 3.5% down payment
500–579: 10% down payment required
Below 500: Not eligible for FHA financing

Note: While FHA sets these minimums, individual lenders often have "overlays" — stricter requirements than FHA minimums. Many FHA lenders require 620+ credit scores even though FHA technically allows 580. Shop multiple lenders.

Debt-to-Income (DTI) Requirements

FHA allows a front-end DTI (housing costs ÷ gross income) up to 31% and a back-end DTI (all debts ÷ gross income) up to 43%. With compensating factors (cash reserves, strong credit), some lenders approve up to 50% back-end DTI.

The house hacking advantage: FHA guidelines allow you to count 75% of projected rental income from the other units to offset your housing payment for qualifying purposes, even if you've never been a landlord before (with certain documentation).

This is called the "self-sufficiency test" for 3–4 unit properties: the projected rental income from all units (including the one you live in, at market rent) must equal or exceed the full PITI payment. If the property passes the self-sufficiency test, the income essentially qualifies you automatically on the housing front.

Documentation required for rental income:

Appraisal with market rent schedule
Signed leases if units are currently rented
Your lender will calculate the qualifying income based on the appraiser's rent schedule

Down Payment Sources

FHA allows flexible down payment sourcing:

Personal savings
Gift funds from family (100% of down payment can be a gift — not allowed on most conventional investment loans)
[Down payment assistance](/blog/down-payment-assistance-programs) programs (check your state's HFA for programs)
Proceeds from selling assets

This flexibility makes FHA house hacking accessible to investors who haven't yet saved a large down payment.

Finding the Right House Hack Property

Property Analysis: The Live-In ROI Test

Before making an offer, run the numbers on two scenarios:

Scenario 1: Does the rent offset your housing cost?

Target: Rent from other units ≥ Your PITI payment (partial or full offset)

Example: Fourplex at $380,000 (3.5% down = $13,300)

Loan: ~$367,000 at 7.25% + MIP → PITI ≈ $2,950/month
Three units rented at $1,000/month each → $3,000/month income
Net housing cost: −$50/month (you're being paid to live there)

This is the holy grail of house hacking: free housing plus positive cash flow.

Scenario 2: Will it work as a pure rental after you move out?

Run a conventional [investment property analysis](/blog/calculating-cap-rate-guide) assuming all 4 units are rented. The property needs to cash flow on its own — because after year 1, you may move out and it must perform as a rental.

If you'll move out after 12 months, you'll need investment property refinancing (conventional or DSCR) if you want to cash out equity, or you can leave the FHA loan in place as you move on.

What to Look For in House Hack Properties

Separate entrances: Each unit should have its own private entrance. Shared interior doors between owner's unit and rental units are a lifestyle and liability problem.

Unit separation: Soundproofing, private laundry, separate utility metering — these features increase tenant satisfaction and marketability.

Condition: FHA has minimum property condition standards. Properties needing major repairs may not appraise to FHA standards. Look for functional kitchens, bathrooms, and HVAC in all units. Cosmetically dated is fine; structurally distressed is not.

Location: You'll be living here. Choose a neighborhood where you're comfortable as a resident, not just one that's a good rental market. Fortunately, good rental markets and livable neighborhoods often overlap.

Rent-to-price ratio: Look for properties where rents are high relative to purchase price. Markets with strong cash-flow fundamentals tend to have higher rent-to-price ratios.

See the best cities for house hacking in 2026 →

The Year-One Experience: Living and Landlording

Managing Your Tenants (Who Are Also Your Neighbors)

Living next to your tenants is a unique dynamic that requires intentional approach:

Set professional expectations from day one:

Use a formal lease agreement (not a handshake)
Establish maintenance request procedures (don't just knock on my door at midnight)
Collect rent via online payment platforms (Venmo isn't professional — use Cozy, Avail, or Buildium)

Screen tenants thoroughly: Even though they're neighbors, thorough [tenant screening](/blog/best-property-management-software-2026) is non-negotiable. A bad tenant is 10x worse when you share a building. Run full credit, background, and eviction checks.

Follow our complete tenant screening guide →

Maintain professional boundaries: Being friendly is fine; becoming friends is complicated. When a friend needs a month without paying rent, it's awkward. When a tenant needs a month without paying rent, you have a business decision to make.

FHA Property Condition Requirements

During your ownership, keep the property meeting FHA minimum property standards. This matters when you eventually refinance or sell:

All mechanical systems (HVAC, plumbing, electrical) must be functional
Roof must be in acceptable condition
Property must be free of health and safety hazards

The Exit Strategy: After Year One

After 12+ months of occupancy, you have several options:

Option 1: Stay and Repeat

Continue living in the property while purchasing a second house hack using another FHA loan. FHA allows one FHA loan at a time under normal circumstances — but exceptions exist:

You've relocated for work (distance exception)
The property is no longer suitable for your family size
You've co-signed an FHA loan for a dependent

Most investors plan a second house hack by ensuring the first one cash-flows adequately without their presence, then moving into a new multi-unit property using FHA again.

Strategy tip: If rates dropped or your equity increased, consider refinancing the first property into a conventional or DSCR loan before taking a new FHA loan — this frees you from FHA's "one at a time" limitation on some programs.

Option 2: Move Out and Rent All Units

After year 1, move out and convert to a full investment property. The FHA loan stays in place — you're not required to inform the lender of your departure after meeting the occupancy requirement. The property transitions to a full rental.

At this point, you can focus on building equity and cash flow while saving for your next purchase.

Option 3: [Cash-Out Refinance](/blog/cash-out-refinance-guide) After Value Appreciation

If the property has appreciated or you've built equity through mortgage paydown, a cash-out refinance (conventional or DSCR) after the 12-month occupancy period can return capital for the next deal. This mirrors the BRRRR strategy applied to your house hack.

Learn about the BRRRR method refinancing guide →

FHA House Hack vs. Conventional House Hack: The Numbers

	FHA House Hack	Conventional Owner-Occupied
Down payment	3.5%	5–15%
Mortgage insurance	MIP (lifetime for <10% down)	PMI (cancels at 20% equity)
Units allowed	2–4	2–4
Rental income qualifying	75% of market rent	Typically not counted for 1-unit; varies for 2–4
Credit minimum	580 (FHA minimum)	620–640 typical
Gift funds for down	100% allowed	Up to 100% allowed in some programs

For most investors, FHA wins on the entry threshold — the lower down payment and gift fund flexibility mean you can start sooner with less capital.

Beyond FHA: Other Low-Down House Hacking Loans

VA Loans (Veterans Only)

For eligible veterans and active-duty service members, VA loans allow 0% down on 2–4 unit properties where you occupy one unit. No mortgage insurance required. This is arguably the most powerful house hacking financing available — if you're eligible.

Learn about VA loans for investment property →

USDA Loans

Available in eligible rural areas, USDA loans offer 0% down for primary residences — but only for 1-unit properties. Not useful for house hacking multi-units.

Owner-Occupied Conventional with 5% Down

Fannie Mae and Freddie Mac programs allow 5% down on 2-unit owner-occupied properties (higher for 3–4 units). PMI applies but cancels at 20% equity — making it cheaper long-term than FHA MIP if you intend to stay.

House Hacking Complete Guide
Best Cities for House Hacking in 2026
[[FHA Loan Requirements 2026](/blog/fha-loan-requirements-2026)](/blog/fha-loan-requirements-2026)
BRRRR Method Refinancing Guide
Buying a Duplex: Live in One Side Guide
DSCR Loan for House Hacking

House Hacking with an FHA Loan: The 3.5% Down Strategy That Builds a Real Estate Portfolio

Key Takeaways