Hey there —

In a three- or four-unit FHA deal, one number can sink the loan before anyone opens your credit report, and it isn't yours. It's the appraiser's.

FHA calls it the self-sufficiency test, and it sits on the building, not you. It's one line in HUD's Handbook 4000.1: the full monthly payment (PITI: principal, interest, taxes and insurance) can't exceed the rent the appraiser assigns to every unit, yours included, after a 25% haircut for vacancy and upkeep. So the building has to gross PITI ÷ 0.75 a month, and it can fail that while you pass everything else.

The inputs: a 6.71% note (the 30-year average FRED published on September 3, the highest since July 2025), financing at 96.5% of price (what 3.5% down leaves), FHA's 0.55% annual mortgage insurance premium, and taxes plus insurance at 1.5% of price a year. The bar lands at 1.057% of price, every month. The 1% Rule, one of the oldest rules of thumb in this business, carried to two decimals inside a federal formula.

Here is where I had it wrong. I assumed a fourplex would be the harder loan than a triplex: more units, more rent to prove. It isn't. There is no unit count in PITI ÷ 0.75; a fourplex just spreads the same bar over more doors. Duplexes skip it, with one catch. To FHA a two-unit plus an ADU (an accessory dwelling unit: a garage apartment, a basement suite) is a three-unit, so a duplex bought or financed with that third unit already in place faces the test. A unit you convert after your FHA loan closes sits outside that loan's underwriting, though it counts on any later FHA refinance.

The bar is low; that's the problem. Our screen starts with the ten-year Treasury (4.77% on that same September 3), adds the five points we require above it for a 9.77% cap-rate floor, and assumes half the rent goes to expenses (the 50% Rule), so the building has to gross double that: about 19.5% of price a year, or 1.63% a month. FHA's floor sits roughly 35% below it. A building can clear the lender's test and still be a bad deal — I walked through that gap on Monday's episode. One qualification: if you'll live in one unit, 1.63% is the rental leg's bar; whether your own housing cost drops is the other leg, and a fourplex short of 1.63% can still be a sound first move on it.

And 1.06% is the friendly version: the handbook takes the greater of 25% or the appraiser's own vacancy-and-maintenance estimate, which you don't set and can't see in advance. Plan on 1.06% or worse.

So multiply the price of any three- or four-unit you're circling by 0.01057. If the appraiser's rent doesn't clear it, there is no loan, whatever your file says. Then check the money behind it, because every program wants reserves: months of the full payment still in your account after the wire, a separate test from the cash you bring to closing. FHA asks for three months on a three- or four-unit. The conventional loan in Monday's scenario, 20% down, wanted six: $2,182 times six is $13,092, and the buyer was $11,577 short with nothing wrong with the property.

If someone had asked you last week whether a fourplex is a harder FHA loan than a triplex, which way would you have leaned? Never compared them? Then tell me which number here was new to you, the building's 1.06% or the reserves behind it. Hit reply — I read every one.

Martin