FHA Self-Sufficiency Test Calculator

Every FHA purchase loan pays an upfront premium of 1.75% of the base loan, usually added to the loan, plus an annual premium paid monthly. For loans longer than 15 years, the annual rate is 0.55% when you put less than 5% down on a base loan of $726,200 or less, 0.50% with 5% or more down, and 0.75% or 0.70% above that loan amount. With 10% or more down it ends after 11 years; otherwise it lasts for the life of the loan. HUD charges it on the average balance of the base loan over the year, which is how the calculator works it out.

Because the self-sufficiency test uses the full payment, FHA MIP counts against you twice: the financed upfront premium raises the principal and interest, and the annual premium is added on top. In the fourplex example below, the $10,132.50 upfront premium is financed and the annual premium of 0.55% adds $263.97 a month for the life of the loan. Loans of 15 years or less have lower rates, which the calculator applies when you choose a shorter term.

A buyer puts 3.5% down on a $600,000 fourplex at 6.25% for 30 years. The appraiser rents each unit at $1,600. Taxes are $6,600 a year and insurance $3,000. The base loan is $579,000.00; adding the $10,132.50 upfront premium makes it $589,132.00.

The fourplex passes with $108.64 a month to spare: its $4,691.36 payment is 97.7% of the net rent. That cushion is thin. The highest price that still passes at these terms is $616,752, and at 6.5% instead of 6.25% the payment rises to $4,787.74, leaving only $12.26.

The $500,000 triplex at 6.5% fails by $648.12 a month. To pass at 3.5% down, its three units would need to rent for $5,364.16 in total, about $1,788.05 each instead of $1,500, or the price would need to fall to $402,486.

When a property fails, these are the levers, applied to the triplex above:

A bigger down payment helps twice: the loan shrinks, and above 5% down the mortgage insurance rate falls, and with 10% down it stops after 11 years. Rate buydowns help but cost points at closing. Rents are the appraiser's call, so the most reliable fix is usually the price: the calculator shows the highest price that passes, which makes a concrete number to negotiate toward.

Reserves and loan limits

For three- and four-unit properties, HUD requires reserves of three months of the total payment left in your accounts after closing ($14,074.08 for the fourplex), whether the loan is approved by HUD's automated system or manually. Manually underwritten one- and two-unit loans need one month. Loan limits for multi-unit properties are higher than for single-family homes and vary by county:

House hacking means buying a small multifamily property, living in one unit and renting out the others. FHA insures loans on one- to four-unit properties, so an owner-occupied multifamily home of two, three or four units can be bought with the same 3.5% minimum down payment as a single-family house. Three- and four-unit properties must also pass the self-sufficiency test above; a duplex doesn't.

The catch is occupancy. Handbook 4000.1 requires at least one borrower to occupy the property within 60 days of signing the mortgage and to intend to keep living there for at least one year. FHA generally won't insure more than one principal residence for a borrower at a time, and it won't insure a loan it finds was designed to use FHA insurance to acquire investment properties.

What your own unit costs you

Once you live there, what matters to you is the payment minus the other units' rent. In the fourplex, the three rented units bring in $4,800.00, more than the $4,691.36 payment, so the tenants cover your housing on paper. Budget for vacancies, repairs and capital replacements before counting on that: with a quarter of their rent set aside, as HUD assumes, you would pay about $1,091.36 a month yourself. Lenders handle the same rent differently when they check your income: they may add 75% of the lower of the market rent or the lease to your income (or the appraiser's operating income figure, if lower), but they can't subtract it from the payment.

If you plan to move out and keep the building as a rental, run it through the DSCR loan calculator too: that is how an investor loan would size a refinance on the rent alone.

The FHA self-sufficiency test asks one question: does 75% of the market rent for every unit, yours included, cover the full payment with mortgage insurance, taxes and insurance? In the examples, a $600,000 fourplex at 6.25% passes with $108.64 a month to spare, and a $500,000 triplex at 6.5% needs either $5,364.16 of total rent or a price near $402,486.

Run the FHA self-sufficiency test calculator with the appraiser's rents, not the listing's, before you go under contract, and keep three months of payments in reserve for closing.