Like others have pointed out, FHA loans can be used for 1-4 unit properties. However when you are financing a 3 or 4 unit property, FHA requires the property to be self-sufficient AND the homebuyer must have 3 months of the proposed housing payment (Principal, Interest, Taxes, and Insurance, Mortgage Insurance, Homeowners Association Fees) in reserves (checking, savings, 401k, etc.) after closing.
What that "self-sufficient" part means is that the maximum mortgage payment for 3 and 4 unit properties is limited so that the ratio of the monthly mortgage payment divided by the monthly net
rental income does not exceed 100%. The appraiser will provide an addendum to the appraisal called a "rental survey". The rent from the rental survey of all units (even the one that is being occupied by your son), minus the appraiserâ€™s estimate for vacancies or 15% (whichever is greater), must be at least how much the proposed housing payment would be. So hypothetically, if the rent from each unit is $1,000 and the appraiser's estimate for vacancy is 13%, then the 15% figure would be used, and the total net rental income would be $3,400/mo. The new housing payment could not be any higher than $3,400/mo.
In higher cost areas (Los Angeles, Boston, New York), that will sometimes create a larger down payment than FHA's required 3.5%... but in lower cost areas, such as Gresham, a 3.5% down payment should still be possible. It's all relative to the sales price & how much the market rents are.
Since FHA doesn't require someone to have previous landlord history in order to use rental income to qualify, if any of the other units are occupied with renters, then that rental income can be used to help your son qualify for a higher sales price than $150k (if he so desires).
If you'd like to discuss further questions I'd be happy to help.
Shane Milne | Lending in all 50 states | NMLS #81195... more
Denny is 100% correct. Unless you want to put down 20%-30% ( or 10% down for FNMA Homepath REOs) for going non-owner, the best option would be have your fiance finance the other purchase in her name therefore requiring a minimum down payment versus a large down payment. Plus I always counsel with my borrowers to always try buy independently of one another if possible for several oblivious reasons but it just a good idea to insulate you from issues that could arise due to a future financial hardships or unfortunately a divorce.