Can You Buy a 5 to 8 Unit Property With an FHA Loan?

No. FHA loans cap at four units. If a property has five or more units, it is not eligible for standard FHA financing, no matter how you plan to use it or whether you live in one of the units. This trips people up constantly, because FHA is famous for letting you buy a small multi-unit building, live in one unit, and rent the others. That works, up to four units. At five, the door closes.

Here is why, and where those buyers should look instead.

The four-unit line, and why it exists

FHA insures loans on one-to-four-unit residential properties. A building with one, two, three, or four units is considered residential. The moment it hits five units, it is classified as commercial real estate, and FHA's residential mortgage insurance does not apply. So a fourplex where you live in one unit and rent three is a classic FHA house-hacking play. An eight-unit building is a commercial purchase, and it needs commercial financing.

This is not a paperwork technicality you can argue around. It is the definition of what FHA insures. Five units and up simply falls outside the program.

What to use for 5 or more units

Once you cross into five-plus units, you are shopping commercial and investment loan products, not FHA. The most common path for a small apartment building is a DSCR loan, which qualifies the loan on the property's rental income rather than your personal income, and is built for investors buying income property. Larger buildings may use commercial multifamily loans with their own underwriting. If you were counting on the low FHA down payment for a five-plus building, that is not available, commercial and investment loans generally want more down and price differently.

The house-hacking sweet spot

If your goal is to live in the building and rent the rest with a low down payment, stay at four units or fewer. That is the range where FHA's 3.5 percent down and owner-occupant terms work. A duplex, triplex, or fourplex is the FHA house-hacker's tool. Anything bigger is a different kind of deal with a different kind of loan. If you are weighing a four-unit versus a larger building, talk it through with us and we will show you how the numbers and the loan options change at that five-unit line.