5% Down For A $1.6M + Fourplex; 3.5% Down FHA Too — But Be Aware of FHA’s Self-Sufficiency Rule!
The “low-balance”/low-cost area “loan limit” (or max loan amount) for a fourplex is $1,551,250.
This means that owner-occupied fourplex buyers can obtain Fannie/Freddie (conforming loan) financing with only 5% down!
This is available in all of our markets — including TX, FL, AZ, OR, ID, TN, GA, and CA.
The “low-balance” loan limit for a triplex is $1,248,150. So, an owner-occupant could buy a $1.3 million+ triplex with only 5% down.
Fannie/Freddie fourplex financing is, by far, the most competitive financing available for potential real estate investors.
It allows them to “invest” in three real estate units with only 5% down — with the potential to have four investment units 12 months after close (once they have met the 12-month owner-occupancy requirement).
The drawbacks include higher interest rates and higher Private Mortgage Insurance (PMI) rates.
For first-time homebuyers, though, the rates are usually not higher (as the normal rate increases for buying three to four units are waived — if income is not too high). We also have ways to mitigate the high PMI numbers now.
NOTE: Straight investor financing for a fourplex would require a minimum of 25% down and much higher rates.
First-Time Homebuyers Can Buy Triplexes and Fourplexes (Buyers Don’t Need to Be “Experienced”)
First-time homebuyers can not only buy fourplexes with 5% down and very low rates, but they can also use the rental income from the other three units to help qualify!
FHA Financing Is Even Better, But…
All homebuyers (not just “first-timers”) can also take advantage of FHA financing to buy three and four-unit properties — with only 3.5% down!
Even better — FHA rates are as much as 1% lower than Fannie and Freddie rates, and FHA’s MI rate is often lower than the PMI rates required for Fannie and Freddie financing.
But — there is a huge roadblock when it comes to FHA financing: FHA’s Self-Sufficiency Rule.
FHA has a requirement that 75% of the market rent from ALL of the units (including the owner-occupied unit) cover the full housing payment (principal, interest, taxes, insurance, and MI).
But the odds of a three or four-unit property meeting the self-sufficiency test in California are about the same as a pigeon becoming president.
Properties in markets like TX, AZ, and FL, though, can often meet the self-sufficiency test.
What About High Cost/High Balance Areas?
In high cost or high balance areas like along CA’s coast, FHA, Fannie, and Freddie have three and four-unit loan limits of $1,872,225 and $2,326,875, respectively.
But, Fannie and Freddie require 25% down for high-balance financing for three- and four-unit properties (and 15% down for two-unit properties).
And the odds of an FHA buyer in that price range meeting the self-sufficiency rule are pretty much zero.
And remember, high balance loans are not available in most markets, like AZ and TX, where the self-sufficiency rule can be met.
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Originally published at on May 14, 2025.
