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The FHA loan program is popular among Washington home buyers seeking a low down payment and flexible qualification criteria. These government-backed loans can be used to finance a variety of property types, including multifamily homes up to four units.
We’ve written about this program many times in the past. In this guide, we’ll discuss multifamily mortgage loans in Washington State to help you finance homes with multiple residences, such as a duplex or triplex.
Here are some key points you should know right off the bat:
Several cities in the state of Washington have strong rental markets, like Seattle. While single-family homes offer great real estate investment opportunities, multifamily properties offer several streams of income from multiple tenants. In places where rental demand is always high, this provides investors with a steady income stream, providing stability, predictability, and profitability on an ongoing basis.
The Federal Housing Administration (FHA) loan program offers a financing option for home buyers who might not meet the stricter criteria found with conventional mortgage loans.
Let’s clear up some important definitions before we go on.
FHA loan: A mortgage loan that’s insured by the Federal Housing Administration, an agency that falls under HUD. With these loans, the government insures lenders against losses resulting from borrower default. Government-backed mortgage loans like FHA and VA typically offer more lenient qualifying criteria compared to conventional loans.
Conventional loan: A mortgage product that is not insured or guaranteed by any government agency. Conventional loans often require higher credit scores and sometimes larger down payments, when compared to the FHA program. Many conventional loans are sold to Fannie Mae or Freddie Mac through the secondary mortgage market.
Multifamily property: A building that contains multiple residential units. These properties can range in size from small duplexes to large apartment complexes. FHA loans can only be used to purchase two- to four-unit multifamily properties, as explained below.
According to official HUD guidelines, FHA loans can be used to buy a multifamily home in Washington that has up to four units, but no more than that. This means you could purchase a duplex, triplex, or fourplex style of home with an FHA-insured mortgage.
This program has its own unique requirements, which can differ from conventional financing.
For example, an eligible borrower could use an FHA loan in Washington State to buy a multifamily home with as little as 3.5% down. Conventional loans often require a larger down payment for multifamily properties.
The credit score requirements for FHA loans tend to be more flexible as well. We’ve covered the primary reason for this already. Lenders who provide FHA mortgage financing for multifamily home purchases in Washington receive additional protections against default.
Additionally, borrowers must intend to live in one of the units as their primary residence. This rule applies to all homes purchased through this program. The FHA defines a principal residence as “a property that will be occupied by the borrower for the majority of the calendar year.”
The Department of Housing and Urban Development (HUD) limits the amount of money a person can borrow when using an FHA-insured home loan. These caps are aptly referred to as “loan limits,” and they can vary by county because they’re based on median home prices.
As it explains on the HUD website:
“The Federal Housing Administration calculates forward mortgage limits based on the median house prices in accordance with the National Housing Act. FHA’s Single Family forward mortgage limits are set by Metropolitan Statistical Area (MSA) and county…”
Pricier real estate markets typically have higher limits, while more affordable markets have lower ones. As for multifamily properties, the limits can vary based on the number of units or separate residences.
For example, here are the 2024 FHA loan limits for properties within the Seattle metro area:
Borrowers should also know that Washington state FHA loan limits for multifamily properties can change from one year to the next. When home prices rise from one year to the next, the Federal Housing Administration raises the mortgage limits so that borrowers can obtain sufficient financing.
All properties purchased with an FHA loan must undergo a home appraisal. This applies to single-family homes and multifamily properties alike.
Unlike a conventional loan, where the appraiser solely focuses on the value, an FHA home appraisal serves two distinct purposes:
The minimum property requirements (MPRs) for FHA-insured mortgage loans mostly focus on health and safety items and structural soundness. In short, the property being purchased must be move-in ready without any serious damage or safety hazards.
Minor issues, on the other hand, can often be corrected and approved prior to closing.
If you want to buy a multifamily home in Washington using the FHA loan program, you need to meet specific FHA loan multifamily requirements, so try to focus on well-maintained properties in good condition. The home doesn’t necessarily have to be immaculate. But it does need to be structurally sound without serious or hard-to-correct issues.
If a duplex, triplex, or fourplex property needs a significant amount of work just to be livable, it probably won’t qualify for an FHA-insured purchase loan.
Can I get a duplex FHA loan in Washington?
Yes, as long as you meet the criteria, you can use an FHA loan to finance the purchase of a duplex. The same goes for a triplex FHA loan in Washington, as well as a fourplex FHA loan in Washington.
Are there occupancy requirements to use an FHA loan for a multifamily home?
You’ll have to live in one of the units in the property as your primary residence. That means that at least one unit must be owner-occupied, and all others may be rented out.
Are there limits on the number of FHA loans I can take out to finance multifamily properties?
You can take out more than one FHA loan, but not at the same time. In most cases, you can only have one FHA loan at a time.
If you’re considering an FHA loan to buy a multifamily property in Washington State, we can help. Sammamish Mortgage has been helping borrowers across the Pacific Northwest since 1992, and we have plenty of mortgage products to choose from, including FHA loans. Get in touch with us today to discuss your needs, to get pre-approved for a mortgage, or to get a free rate quote for a mortgage.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.