41. How to House Hack Your First Property With Just 3.5% Down FHA Loan

What if you could buy your first rental property with as little as 3.5% down—and have your tenants help offset your mortgage?

In this episode, Violeta and Lindsay break down one of the most accessible strategies for getting started in real estate investing: house hacking with an FHA loan. They explain what house hacking is, how FHA financing works, and why combining the two can create a lower-barrier path to becoming a first-time real estate investor.

Throughout the conversation, they walk through how you can purchase a property with up to four units, live in one unit, and rent out the others to help offset your housing costs—or potentially cover a significant portion of your mortgage. They also explain some of the key benefits of FHA financing, including the lower down payment requirement, more flexible qualification criteria, and the possibility of using rental income to help qualify for the loan.

But house hacking isn't as simple as finding a property and moving in. Violeta and Lindsay break down the FHA occupancy requirements, mortgage insurance, property eligibility standards, loan limits, and the importance of making sure the property is safe, livable, and actually works financially. They also explain why a property being eligible for an FHA loan doesn't automatically make it a good investment.

They then walk through the steps aspiring investors should take before making an offer, including conducting a financial audit, finding the right FHA lender, researching local rents, analyzing the market, identifying eligible properties, and determining whether the numbers align with your personal goals. They emphasize that successful house hacking requires more than simply qualifying for financing—it requires understanding your market and knowing exactly what you want the property to accomplish for you financially.

And once you become a landlord, the learning doesn't stop. Violeta and Lindsay discuss the responsibilities that come with managing tenants, handling repairs, enforcing leases, following local housing laws, and maintaining a safe property. They also explore what ethical landlording looks like and why building wealth should go hand in hand with treating tenants with care, respect, and responsibility.

Whether you're a first-generation Latina thinking about buying your first home, exploring real estate investing, or looking for a way to lower the cost of homeownership, this episode offers a practical introduction to house hacking and FHA financing. Violeta and Lindsay also share why starting with a duplex may make more sense for some beginners than immediately jumping into a four-unit property—and why you should always balance your investment goals with what you're realistically prepared to manage.

Before you start shopping for your first house hack, tune in for practical advice, important questions to ask your lender, and the key steps you need to take to determine whether an FHA house hack is the right strategy for you.

Links Mentioned:

• Free Latinas in Real Estate Community
• How to Calculate Cash Flow Episode
• FHA, VA & Other Home Loan Options for Real Estate Investing Episode

Transcript

How to Use an FHA Loan to House Hack

SPEAKER_01 0:00

Do you want to make money out of this house? Even though it's the house you're planning to occupy? Do you just want to offset something of your mortgage? Do you just want somebody to help you with utilities? What are your goals?

Violeta 0:12

With the FHA loan, let's talk about what it is and why it's such a great option for someone that's looking to get into real estate investing. Because one of the biggest questions is like, how am I going to start when typical investment loans they are asking like 20-25% down? But with the FHA loan, it's meant for first-time home buyers. This is backed by the FHA and HUD. These lenders are able to give you a better option because they see it as a lesser

Can You House Hack with an FHA Loan?

Violeta 0:43

risk. Can you use an FHA loan to house hack your first rental property? The quick answer is yes, you can. House hacking is one of the easiest ways to get into investing in real estate because it lowers your cost of entry. And using the FHA loan on top of that helps out even more by giving you more options and opportunities. And so that's what we want to talk about today on how you can use the FHA loan to house hack your first rental property and start your real estate investing journey. So we're going to talk about first of all what is house hacking, what is an FHA loan and how it works, and why it's such an awesome way to get into real estate investing.

What Is House Hacking?

Violeta 1:33

And we're also going to talk about a little bit of an example and give you an idea of how it actually works and why it's so awesome to use that product. Not even that one, but there's similar products out there that are available to you because you're househacking a property.

SPEAKER_01 1:52

Yeah. So first let's talk about what is house hacking. And you'll hear a lot of buzz on the internet about house hacking. Pros and cons. So in plain terms is living in a property and finding a way to bring rental income in the property. This can be renting pros, like Violeta in the past have done and like I have done in the past. But the best way to house hack or the more private way to house hack is to buy a multifamily, like a duplex, and you can live in one unit and rent out the other. And when you do this, the tenant rent helps pay and offset your mortgage and or even expenses. In some cases, you can even cover the whole mortgage. Why is this a key beginner strategy for first-generatinas? Because you can take advantage of the first-time hold buyer loan options like FHA. So you not only have to calm down with the down payment 20%, but FHA also offers low interest rates compared to any other type of loans. And you also have the lower credit score. Now, you still have to analyze your first investment property, but we'll talk about it a little more about in this

What Is an FHA Loan?

SPEAKER_01 3:04

video.

Violeta 3:04

Yeah, and with the FHA loan, let's talk about what it is and why it's such a great option for someone that's looking to get into real estate investing. Because one of the biggest questions is like, how am I going to start when you, you know, typical investment loans, they are asking like 20, 25% down, and then all this extra stuff, like other requirements that most of these investment loans ask for. But with the FHA loan, it's meant for first-time home buyers. And it's basically a mortgage that is backed by the Federal Housing Administration, which is part of HUD. And it is an option, you still have to deal with private lenders, but because it's backed by the FHA and HUD, these lenders are able to give you a better option because they see it as a lesser risk. Because if something goes wrong, then FHA is there to help them out. And so, because of that, it offers a better option for first-time home buyers. And it also allows the lenders to offer more flexible financing and they can lower a lot of the requirements. Now, of course, you know, lenders can still have strict guidelines, but there's going to be lenders out there that are going to give you some good options there. So if you're thinking of like, oh, you know, my credit score is a little bit low, or I don't have that much for a down payment, an FHA loan is a great option.

FHA Down Payment & Property Options

Violeta 4:36

And this is because one of the big things is that you can put down as little as 3.5% of the purchase price. So you could get into a property with that little bit of a down payment versus 20% down or 25% down. In my case, I had to always have 25% down. But it also allows you to have a little bit less of a credit score and it's an easier process to qualify. Now, why an FHA loan is such a great option as a new real estate investor or someone that is looking to get into real estate investing is because you can get up to a four-unit property. Lynn mentioned that you could get into a duplex to house hacked, so you could live in one unit and rent out the other one to help offset your housing cost or even cover it entirely. And because an FHA loan lets you get up to a four-unit property, that's even kind of a it accelerates your real estate investing journey. But we are gonna talk about a little bit of the cons of that, of why you may want to not necessarily go to a four-unit right away, especially as a new real estate investor. But we're gonna talk about that a little bit later. Now, one of the things that an FHA loan is going to have you also pay additionally is that you're going to have to get mortgage insurance premiums, MIPs, if you put less than 20% down. This can be like up to 1.75% of the upfront fee. Well, as an upfront fee, so it'll be 1.75% of the purchase price as an upfront fee. It can be rolled into the loan, and then you'll have an annual fee of maybe 0.55%, which is paid monthly. So on top of your mortgage, you're gonna have that MIP payment as well. Now, if you pay less than 10% down, then that's just gonna be attached to your mortgage throughout the life of the loan, unless you refinance out of an FHA loan. So that's also an option to get into an investment property, and then later on you can refinance. And we'll talk a little bit about that a little bit later.

Why FHA Is a Great Option for First-Time Investors

Violeta 6:56

So the big thing I want you to take away with the FHA loan is that it is a loan product that is out there for first-time home buyers, hence why you have to house hack the property, hence why it is a great option if you want to house hack as your first strategy to get into real estate investing because it's going to allow you to put as little as 3.5% down. You're going to have the ability to have a lower credit score. Didn't mention it a little bit earlier, but even debt-to-income ratio is more, you can have a higher versus if you just go for an investment property. And also, again, we're going to talk about it a little bit later. In addition to it, is you might even be able to have down payment assistance. But we'll get into that a little bit later in the video.

SPEAKER_01 7:44

Yes. And I we want to mention too, like all of these terms, it's gonna take you a little bit to understand FHA, like Federal Housing Administration, right? So this is just a program in order for the world government to make it more enticing or more lower the barriers of entrance for you to get into house

Understanding FHA Mortgage Insurance

SPEAKER_01 8:03

ownership. We have normal banks, which are private entities, right, that want to lend you money, but they have this set of criteria and requirements in order for you to qualify to get a loan from a regular bank. Now the government came in and say, I'm gonna have this set of criteria, I'm gonna back up the loan that you're gonna give to this individual. And now you can lower your criteria because I'm backing up this loan. So it's a government program that makes it a little bit easier for you to get into a house, like a house as an owner, right? So this is basically the big name FHA loans or FHA housing or anything like that. So another thing that people get hung up on FHA loans is the PMI, so private mortgage insurance. Because the bank is giving you a loan when you haven't made a down payment like 20%, so they deem you as a more risky person to learn to. So because of that, they want this additional insurance. Of the book being backed up by the government, they want this thing called private mortgage insurance, which is meant for the bank to keep in order that if you default the loan. So this private PMI for FHA products of loans, they are for the entirety of the loan. So this is an additional thing. So when you look at your mortgage or whatever you have, it's usually components of four. So we have our principal, interest, taxes, and insurance. When you do get an FHA or you are qualified to get an FHA loan, you're gonna have an additional thing there, PMI, so private mortgage insurance. That could be as low as $70 or $40. It really depends on the bank, it depends on the loan planner. As much as like $200, $300, I've seen that in some cases, it depends on how big the loan is, and it's something you have to consider because when you run your numbers, you're gonna be like principal, interest, taxes, and insurance, and then PMI, right?

FHA House Hacking Occupancy Requirements

SPEAKER_01 10:07

This is an opportunity to talk to your member and see how much the PMI will be. But because this PMI comes not only in FHA, anytime you put less than 20% down as a down payment, you have that PMI. Don't let that stop you from considering an FHA because FHA is a stepping stone, right? It's only lowering the boundaries and the barriers for you to get into home ownership. So, what are the requirements for house hacking if you are trying to house hack when you are getting an FHA product? So, FHA is not designed for you to buy a pure investment property and never move in. FHA requires you to have occupancy. So if you're gonna have a single-family home, you need to occupy one of the rooms in order for you to even try to rent out the other rooms. Same thing that if you have a multifamily occupy one unit in order to rent out the other units. There are some exceptions. For example, the criteria is that you move in within 60 days of closings and you could occupy a property for at least one year. But there's some exceptions for military or like, for example, job rotations that can happen to you. So the property that you can move in can have up to four units. So, like Violeta mentioned, it can be a duplex, a triplex, a quadplex. So it's an excellent strategy to buy your primary home. It doesn't mean that it has to be a single-family home, right? You can, like I said, you can buy a duplex, triplex, or quadplex. You need to qualify for a lender. So even though FHA lowers the boundaries, it has its own criteria, you also need to get together with the lender and go through your own qualifications. So that lender will look at your income, your credit, your debt, your savings, your employment, and the property itself. There's also some instances in because you are getting into a small motor family, you're able to qualify for the rental income that property is gonna be in. So they are a little more flexible when looking at your debt to income ratio. They could take in consideration that if you buy in a duplex, you could potentially bring in a rental income from that, making sure you're able to qualify to get into that house, right? Because you look at that potential futuristic rental income from the duplex.

FHA Loan Limits & Property Requirements

Violeta 12:28

Now, with the FHA loan, there are some limits to it on top of the requirements that you have to fulfill, like living in the property, as Lynn mentioned. And it depends on the year, the county, and the number of units. So there is a FHA mortgage limit. I'll link it down below. It's on my blog. So all this information will also be on the blog, and I will link it down in the show notes or in the description so you could see the limits there and see what you can actually buy, but they're still pretty high for what you can get, which is again one of the awesome things about house hacking a property because you have the ability to utilize an FHA lump. So, for example, I looked up Bexar actually is called Bear County for some reason. It's spelled B-E-X-A-R, but they say Bear County here, so it messes me up all the time. But for example, a single family home, you can get up to 557,750. And if you go all the way to a four-family, which would be a quadplex, then you could go up to a million dollars and 72,600. So that's really up there. And I've seen some quadplexes out there that are way less than that here. Now, of course, you do have to make sure that they're livable. That's another qualification with an FHA loan of kind of like on the con side, because it's meant to be a primary home for first-time home buyers. You can't use this loan to go and buy a rehab property, right? It has to be livable, right? Because the point is to get you your first home, not your first investment.

FHA House Hack Eligibility Checklist

Violeta 14:11

But that's the loophole here. So you can get up to a million dollars here in San Antonio area. So just imagine that like how much of an acceleration your real estate investing journey can be by just doing this first house hack. And so a quick little checklist that I have is of course, remember you gotta have owner occupancy. You have to live in it for a minimum of 12 months, unless, you know, of course, there's some exceptions. The property type, which I mentioned, has to meet the FHA eligibility and appraisal standards that they have. And the lender will talk to you about a little bit more of that, but basically has to be livable and it has to appraise for whatever you're gonna, you know, at least what you're gonna pay for, you know, the purchase price. They don't want you to go into the negative. The down payment, little as 3.5% down if you qualify. Loan limit depends on your county. Now, one awesome thing is that the rental income can be eligible to be used to qualify. So if you're buying a property that already like has other units rented out, there's renters in there, that could be used, or even the potential rental income. So it depends again on the lender how much they will qualify, but that could go towards your own qualification because now that's your potential income that you're gonna get. Again, remember about the mortgage insurance. So when you're out there shopping and looking at what you can afford, remember if you're gonna put less than 20% down, you're going to have that on top of your mortgage payment. And then again, mention that it has to meet local code expectations and just be safe and livable because again, you have to occupy this property within 60 days.

Step-by-Step: How to House Hack with an FHA Loan

SPEAKER_01 16:02

And step by step, how to use your FHA to househack a duplex? First, you have to conduct a financial audit. So you are gonna have to talk to a lender, you're gonna have to present your income and present your debts and present your assets, and they're gonna let you basically guide you to understand what you can afford. You may need more of a down payment. It all depends on your financial situation. You also need money for closing costs, inspection, appraisal costs, moving expenses, the bosses' free utilities, repairs, and even have to show they have reserves for emergencies. A lot of lenders that are giving out future products normally they want to educate you about house ownership, especially for your first gen and you never own a house. You may not know that you are gonna have to have so money in reserves. Like, what if I have like just enough for the down payment, the closing costs, but then after we close the loan, I have nothing in my savings account because I just bought a house, right? But no, like lenders want you to have some type of emergency funds in order for you to have like enough more achievements for the first three months or the first six months. So have in mind that that's also something that they want to look at. You have to find an FHA lender. So a lot of people or a lot of brokers that you talk to, you're gonna have to find out if they are giving FHA products. So, because there are a lot of type of loan products out there, conventional now, which is the traditional lending products that do sell, could be as low as a double minus 3.5 percent.

How to Research Your Market & Rental Income

SPEAKER_01 17:44

But FHA has its own qualifications, right? It's its own thing. Number three, choose a market and learn the rents. So potentially you want to live in this area, you know what the properties are being sold for because you're trying to get into a house where you've been looking at the market, you've been looking at Zillow, you've been looking at Ren, you're checking out what they're selling for, and also not only what you can afford, but what are the rents that are bringing up if you're buying a duplex and then each unit is two-bedroom one bat, do you know how much a two-bedroom one bat renting for in your market? That's something you want to look at. If you're buying a single family home and then you are just planning to rent out the rooms, what is the average room rental in your market going for, right? But you want to check that the current rental listing, just like you're renting an apartment, you go into apartments.com, Facebook Marketplace, solo rentals to see if like what is actually the rental income that is like average in your market. Maybe you want to talk to a property manager and ask them what is a comparison. So you're gonna have to compare like parking structure, conditions of the rooms that you're renting out or the duplex that you're renting out, right? They are grades to rentals too. Some rentals are luxury, some are more like detailed

Finding an FHA-Eligible Property

SPEAKER_01 19:04

neighborhoods. So make sure you're comparing accurate listings to the thing that you're looking at, the house that you're looking at, the duplex that you're looking at. Number four, you have to look for eligible properties. So for every chain standards, that means that the house is livable. What does that mean to say that house is livable? That the utilities are connected, that the house has a roof, that there's no like holes on the walls or holes on the floors because that is not safe. So the government backs this loan product in order for you to get into a house that you can move in 60 days after you're close, right? So you need to be able to live there without that house being a safety hazard. And in some instances, this is gonna become a little bit tricky because FHA has like high standards for a house that's doable. So don't get disappointed if something has to happen before you close on this loan. FHA just try to make sure that every single safety thing is being looked at for this house. So make sure the numbers meet your goals.

How to Know If the Numbers Work

SPEAKER_01 20:06

It's like, for example, do you want to make money out of this house? Even though it's the house you're planning to occupy. Do you just want to offset something of your mortgage? Do you just want somebody to help you with utilities? What are your goals, right? That will determine how you're gonna calculate that cash flow or that upsetting of your mortgage. And finally, after you take all of these steps, you make an offer. If you're ready financially and you know you want to use an FHA product and you look at your potential rental income and you look at your market, make an offer because that is the only way that you take action upon everything that you like learn. There's gonna be a moment for action if everything that we're saying to you is now resonating, it's now making sense, and then you're ready financially, it's time to take action. Prepare to be a landlord, and this is going to be its own thing. But we're talking about our comunidad right now, we're talking about to you.

Becoming a Landlord & Ethical Landlording

SPEAKER_01 21:04

We are hustlers, we learn how to rise to the occasion in many more ways than one. So when you are taking on this challenge, you are gonna have to take it upon yourself to learn how to be a landlord. And this is something that we talk about in this podcast too, because it's on career, it's our profession, right? Once you start renting out roles or renting out units, you're gonna be responsible for the tenant communication, repairs, enforcing the lease, which you're gonna have to make sure you're okay with the housing compliance regulations for the county, local tenant lows, and you're gonna make sure that the property is safe because you're not just in charge of your own home, you're in charge of somebody else's home. So, this is where ethical landlord leave matters, and this may ruffle some feathers from people out in the internet. Ethical landlordly means that you are. Not just 3D. You're not just trying to make somebody else pay your mortgage. You're also trying to build wealth, right? So you want to operate something with care.

The Biggest Takeaway About FHA House Hacking

SPEAKER_01 22:10

You want to make sure that you're documenting things. You want to make sure your boundaries and respect is set. So in a nutshell, using an FK loan to House Hack can be one of the most accessible ways to buy first-rent property, especially if you're not putting a giant down payment like 20%. But remember, this is just the product, it's a financial tool. So it's not guaranteed that your duplex is a good investment. The real power comes from combining financing and deal analysis. This is how you build wealth with strategy and confidence.

Why a Four-Unit Property May Not Be Best for Beginners

Violeta 22:43

Yeah, and we did do an episode of how to calculate cash flow that we will link down below. And this is what I kind of briefly mentioned about some of the cons, and Lynn kind of mentioned it already. On yes, you can definitely really accelerate your real estate investment portfolio by going straight for a four-unit property. But this is where you also have to make the choice and know yourself because a four-unit, of course, you have to occupy one unit, but that means you're gonna have three more tenants. And as a beginner, this can be challenging because Lynn was mentioning about making sure you are doing the maintenance, tracking the tenants, making sure they pay their rent on time, their leases, all of that. And that can be a lot and it could be overwhelming for a first-time real estate investor. And so we are gonna do another episode on some of the property management side that we have that we're gonna record that soon and a lot of tools to help you do that, especially me. I just took over my properties, and so I've been learning and it's been a learning experience. And I've been doing this for quite some time, but I use property managers. So if you're not gonna do a property manager and you want to do it manage yourself, just keep that in mind on top of making sure that the numbers work when you go buy a property. So, for example, with the market that I mentioned earlier, that you can get a four-unit property up to a million dollars, that doesn't mean go out there and buy a million dollar quadplex because the numbers might not work.

Why Your Numbers Matter More Than the Loan Limit

Violeta 24:24

The rental market over here in San Antonio pays way less than you would think and is not going to cover or be profitable even after you rent out the fourth unit. So it does still take some strategy, but it's still a great option. I use similar options. We also did an episode talking about some other similar, we talked about FHA loan, talked about the VA loan and some other ones, and I'll link that episode down below because I ended up using the VA loan, which is another great option. But FHA loan is available to pretty much everybody, right? Which is a great option to house hack. But you still want to do some strategy, which is why my recommendation is start with like if your brand spanking you, getting into the game, then you can go ahead and do a duplex because you you'll just have one tenant, you start learning the game, whatever, live in it for 12 months, and then go out and house hack.

Should You Start with a Duplex or Fourplex?

Violeta 25:18

Maybe now you could go try a house hack a four-unit property. But remember, you gotta balance the wanting to grow your portfolio with what you're capable of doing. If you know you're really good with numbers and organized and you're good with people and tracking, then again, you know yourself, maybe you could do a four-unit. But if you know that you're barely learning it, you're getting overwhelmed, all that stuff, then start maybe with the duplex or make sure you account for a property manager to have that as a buffer and help you navigate all this stuff because it gets complicated. Remember, you're still dealing with

Final Takeaways for New Real Estate Investors

Violeta 25:54

tenants, these are people, and there's laws and regulations that you have to remember to make sure that you follow them. And so just keep that in mind. But again, yeah, house hacking is such a great way to get into it. And I do want to plug in our community. You know, Lynn and I, we started a Latina real estate investing community. It's gonna be linked down below. We're slowly growing, but it's free to join, and that's where you can find us, ask questions. And the goal is to create a network and a community so you could learn and network and just you know have support. So that will be down below. But yeah, other than that, let us know what other questions you have, and we will see you in the next episode. Bye. Bye, guys.