Short answer
For an FHA loan on a three- or four-unit home, HUD requires the building to pay for itself on paper. The appraiser estimates fair market rent for every unit, including the one you'll live in. The lender subtracts the larger of the appraiser's vacancy and maintenance estimate or 25 percent, and the monthly principal, interest, taxes and insurance can't be more than what's left. Two-unit homes don't have this test.
How is the test figured?
HUD's Handbook 4000.1 calls the result net self-sufficiency rental income. The steps:
- Add up the appraiser's fair market rent for all units, including the unit you'll live in.
- Subtract the greater of the appraiser's estimate for vacancies and maintenance, or 25 percent of that rent.
- Compare what's left with the full monthly payment of principal, interest, taxes and insurance.
The payment divided by the net rent can't be more than 100 percent. In other words, the net rent has to be at least as much as the payment.
Can you show an example?
Say an appraiser estimates rents of $1,900, $1,800 and $1,700 for a three-unit home, or $5,400 a month. Subtracting 25 percent leaves $4,050. If the payment with taxes and insurance comes to $4,050 or less, the building passes. If it's $4,300, it doesn't, even if your own income is strong. These numbers are only an illustration.
What if the building doesn't pass?
- A lower price or a larger down payment lowers the payment.
- Property taxes are part of the payment, so the town's tax rate matters. See NH property taxes.
- A conventional loan doesn't use this test, though it has its own rules for counting rent. See conventional loans in NH.
Running the test before you make an offer saves time, since it depends on the appraiser's rent estimate.
Is this the same as counting rent to qualify?
No. It's a separate check. To help you qualify, FHA can also add rent from the other units to your income. With little or no rental history on your tax returns, the lender uses 75 percent of the lower of the appraiser's market rent or the lease. The rent is added to your income; it isn't subtracted from the payment. For three- and four-unit homes, HUD also requires cash reserves equal to three months of payments after closing.
Where can I learn more?
See buying a 2 to 4 unit home to live in and the FHA loan guide. If the building was built before 1978, lead paint rules apply too: lead paint disclosure when buying.
Sources
- HUD Single Family Housing Policy Handbook 4000.1, Update 18 (August 2026), Three- to Four-Unit: Self-Sufficiency Rental Income Eligibility
- HUD Single Family Housing Policy Handbook 4000.1, Update 18 (August 2026), Rental Income from Subject Property; Required Reserves for Three- to Four-Unit Properties
Checked November 2, 2026. Rules and dates change, so confirm current details before you rely on them.
General information only, not tax or legal advice. Program availability, eligibility and terms vary by lender and are subject to change and to underwriting approval. Not a commitment to lend.