FHA loans allow you to buy a 3- or 4-unit property with just 3.5% down—but only if the property passes the self-sufficiency test. This guide explains how the test works, why it's harder to pass in 2025, and what to do if a property doesn’t qualify.
Buying a multi-unit property with an FHA loan is a strategic real estate investing move.
With one motion, you become a homeowner and a real estate investor.
What’s more, your bottom-line monthly payment might be less than if you purchase a single-family home, thanks to rental income.
But before making an offer on a 3- or 4-unit home, it must pass the FHA self-sufficiency test.
Highlights
The FHA self-sufficiency test requires that rental income from 3- and 4-unit properties fully covers the mortgage payment to qualify for FHA financing.
Projected rental income is calculated using a vacancy factor and must match or exceed total monthly costs.
Higher interest rates make passing the test more difficult; carefully assess rental potential.
If a property doesn’t pass the test, consider a larger down payment, lower rate, or an alternative loan type.
Run the self-sufficiency test with a lender before making an offer to avoid potential financial setbacks.
What Is the FHA Self-Sufficiency Test?
The FHA self-sufficiency test is a newer guideline that determines whether a property’s rental income can cover its full monthly mortgage payment.
A triplex or fourplex is not eligible for FHA financing unless its rental income potential exceeds the payment amount. The rule does not apply to duplexes.
For example, you can use an FHA loan on a 4-unit home with $4,000 in eligible rental income (after the vacancy factor is applied) only if the payment is less than or equal to $4,000.
That being said, there are some “gotchas,” and the formula isn’t as simple as stated above, so let’s dive into the details.
The test ensures the property can still be self-sufficient and generate enough income to make mortgage payments if the borrower moves out.
Calculating FHA Self-Sufficiency Rental Income
The FHA doesn’t consider a property's full rental income potential as eligible for the self-sufficiency test.
You must use an FHA-approved appraiser’s rent estimate minus a vacancy factor.
The vacancy factor is the greater of:
The vacancy factor on the appraisal report or
25% of the monthly net rental income
If the appraiser says the area’s typical vacancy rate is 20%, use the standard 25% vacancy factor since that is higher.
Calculating the PITIA Payment
Once you have the eligible rental income, it must be equal to or greater than the full PITIA payment.
FHA regards the full payment as:
Principal: Loan balance due each month
Interest: Interest due each month
Taxes: Property taxes (annual rate, divided by 12 monthly payments)
- Insurance:
Mortgage insurance: FHA annual mortgage insurance premiums vary by loan term, type and loan-to-value ratio
Homeowner’s insurance
Association (HOA) dues: Applies if the property is located in an HOA
Self-Sufficiency Test Formula
Rent from all units X 75%
Must be greater or equal to:
The full housing payment, including principal, interest, mortgage insurance, property taxes, homeowners insurance and HOA dues
FHA Self-Sufficiency Test Example
Here's an example: Imagine you’re buying a 4-unit home with an FHA loan and want to see if it passes the test.
Total units including owner-occupied unit | 4 |
Market rent estimate for all units | $4,000 |
Appraiser’s vacancy factor | 20% |
Standard vacancy factor | 25% |
Self-sufficiency rent ($4,000 minus 25%) | $3,000 |
Principal, interest, mortgage insurance, taxes, homeowner’s insurance, and HOA dues | $2,900 |
Result: $3,000 ≥ $2,900, so the home is eligible for FHA financing.
What If the Home Doesn’t Pass the Test?
If the home doesn’t pass, you still have options.
Make a larger down payment: This could lower the payment to the point where the property does pass.
Buy down your rate with discount points: This could also reduce the payment enough to reach eligibility. Learn more about discount points with our guide.
Get a conventional loan: Fannie Mae offers a 5% down multifamily loan. Previously, conventional borrowers had to put 15% to 25% down. The loan does not require a self-sufficiency test.
Consider a VA loan: If you’re a veteran or current military servicemember, try a VA loan. You can buy a home up to 4 units with no down payment required.
Do the Test Before Making an Offer
Before you make an offer on a 3- or 4-unit home, consult your lender. The loan officer can run the test with decent accuracy before you commit to a home.
You don’t want to risk losing your earnest money because the property can’t pass FHA’s stringent test.
Self-Sufficiency Test Is Now Harder To Pass
Rates have risen dramatically since mid-2022, making it more difficult to pass the test.
For example, a full payment might be $2,000 at a 3% interest rate but $3,500 at a 7.5% interest rate.
If market rents are $3,000, the property would pass at a lower rate but not at 7.5%.
This is why it’s more important than ever to make sure a property “pencils out” according to FHA guidelines.
How To Get Acceptable Rent Estimates
Part of the self-sufficiency test requires a market rent estimate from an FHA-approved appraiser.
In addition to a standard appraisal report, the lender will request another report from the appraiser detailing rent estimates, which is an additional fee.
This begs the question: What if you estimate a certain market rent, and then the appraiser low-balls the rent estimates?
It’s possible. Do your own research, or ask your Realtor for help pulling data.
If your estimate cuts it close, making an offer might not be in your best interest. Just a slight reduction in rent or a high vacancy factor from the appraiser, and the property may fail the self-sufficiency test.
Will a Multifamily Fixer-Upper Pass the Test?
FHA allows you to fix up a 2-4 unit residence with its multifamily 203k renovation program. However, it's best used on a duplex. For 3-4 units, you must use the existing lower rents for the self-sufficiency test, not the higher future rents after the renovation.
There are few, if any, properties that will be self-sufficient at the lower current rent level.
The FHA Triplex and Quadplex Test: The New Reality
Buying a multifamily property with FHA financing remains a smart way to combine homeownership with real estate investing. But the self-sufficiency test has added a new layer of complexity, especially with today’s higher interest rates. Many buyers find that otherwise promising properties don’t meet the test's requirements.
That’s why it’s essential to work with a knowledgeable lender early in the process. A lender can help you assess whether a property is likely to qualify and walk you through strategies—like buying down your rate or increasing your down payment—to improve your chances. They can also help you explore alternative loan options if FHA isn’t a fit.
If you’re considering a 3- or 4-unit purchase, start by comparing lenders who understand the nuances of FHA multifamily guidelines. With the right team and prep, your multifamily homeownership goals are still well within reach.
