Can You Use an FHA Loan to Purchase a Duplex Home?

FHA LoanWith a Federal Housing Administration (FHA)-insured loan, you can buy a duplex property given that you pass the requirements. For instance, owner occupancy is one. Typically, the buyer must reside in a unit to be able to purchase a duplex using a multifamily FHA loan. The borrower must also provide a minimum down payment of 3.5 percent of the property's appraised value or purchase price.  

The Required Down Payment

The Department of Housing and Urban Development calls the down payment the minimum required investment. This standard is similar for all FHA borrowers who are purchasing a house, whether it is multifamily or single-family.

Fortunately, the FHA now permits borrowers to utilize funds given by a third party to cover the entire or some of the down payment expenses. They refer to these as gifts that can help reduce the weight of the upfront investment. The government allows this down payment gift for borrowers who are using an FHA loan to buy a single-, two-family or duplex-style property.

A crucial requirement is that the individual donating the cash has to give a letter stating they do not expect to be paid in any matter whatsoever.

The Credit Score Requirement

For FHA borrowers, the minimum credit score is similar for those purchasing a single-family or duplex home. The latest HUD guidelines mandate all borrowers that use this program to have a minimum credit score of 500 or higher. To be able to qualify for the down payment declared above, these borrowers must hold a rating of at least 580.

Do remember that mortgage lenders have the freedom to lay their own requirements called an overlay besides the ones listed by the HUD. This means that the credit requirements will depend on the mortgage company, so you should do your research and take your time in choosing.

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