A three- to four-unit property is either:
• a Single Family residential Property with three to four individual Dwellings Units; or
• a Single Family residential Property with two individual Dwelling Units and one Accessory Dwelling Unit (ADU) or three individual Dwelling Units and one ADU.
The Mortgagee must determine the Net Self-Sufficiency Rental Income and obtain a completed form HUD-92561, Borrower’s Contract with Respect to Hotel and Transient Use, from the Borrower.
Net Self-Sufficiency Rental Income refers to the Rental Income produced by the subject property over and above the Principal, Interest, Taxes, and Insurance (PITI). The PITI divided by the monthly Net Self-Sufficiency Rental Income may not exceed 100 percent for three- to four-unit properties.
Net Self-Sufficiency Rental Income is calculated by using the Appraiser’s estimate of fair market rent from all units, including the unit the Borrower chooses for occupancy, and subtracting the greater of the Appraiser’s estimate for vacancies and maintenance, or 25 percent of the fair market rent.
In addition, for all three- to four-unit properties, the Mortgagee must verify and document reserves equivalent to three months’ PITI after closing.
Except as otherwise stated in Handbook 4000.1, FHA’s Single Family programs are limited to one- to four-family properties that are owner-occupied Principal Residences.
For additional information see Handbook 4000.1 II.A.1.b.iv(B); II.A.1.b.iv(B)(3); II.A.4.d.i(C); and II.A.5.c.i(C)(2) at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh