Tools · Underwriting mechanics
FHA Self-Sufficiency Test Calculator
For three- and four-unit purchases: does 75% of the appraiser's rent cover the whole payment?
On a three- or four-unit FHA purchase the building has to pay for itself on paper. The appraiser's market rent for every unit, including the one you will live in, minus at least 25 percent for vacancy and maintenance, must be at least the full monthly payment: principal, interest, taxes, insurance, mortgage insurance and any HOA dues. If that payment is more than 100 percent of the net rent, the loan fails the self-sufficiency test no matter how strong your income is.
The property
Appraiser's market rent, per unit
Use the rents from the appraiser's rent schedule, not the seller's numbers. The unit you will live in counts at market rent. 30-year fixed term, upfront MIP financed.
The test
Estimate only. Annual MIP is shown on the base loan; HUD calculates it on the declining balance. The FHA loan limit for a 3-unit property varies by county and is checked separately. Source: HUD Handbook 4000.1, rental income from the subject property; Mortgagee Letter 2023-05 for MIP.
How the test works
HUD Handbook 4000.1 sets the rule in two lines. Net self-sufficiency rental income is the appraiser's estimate of fair market rent from all units, including the unit the borrower chooses for occupancy, minus the greater of the appraiser's estimate for vacancies and maintenance or 25 percent of that rent. Then PITI divided by that net figure may not exceed 100 percent for three- to four-unit properties.
Three things in that rule surprise buyers. Your own unit counts at market rent even though you will not collect it. The 25 percent haircut is a floor, not a negotiation. And PITI means the whole payment, with FHA's annual mortgage insurance and any association dues inside it, which is why a building that cash-flows for an investor with 25 percent down can fail for an owner-occupant with 3.5 percent down and a bigger loan.
A Chicago three-flat, worked
The calculator opens with a realistic file: a $650,000 three-flat, 3.5 percent down, 6.5 percent on a 30-year fixed, $9,600 a year in property tax, $2,400 in insurance, and appraiser rents of $1,900, $1,900 and $1,700. Gross rent is $5,500. After the 25 percent reduction the building can count $4,125.
The payment side: a base loan of $627,250, plus $10,977 of upfront mortgage insurance financed in, gives principal and interest of about $4,034. Add $800 of tax, $200 of insurance and $287 of annual MIP at 0.55 percent, and PITI is about $5,322. That is 129 percent of the net rent. The file fails by roughly $1,200 a month, and the three units would need about $7,100 in combined market rent, or $2,365 each, to pass at this price and rate.
That gap is typical of three- and four-unit listings in Chicago, Los Angeles, Miami, Indianapolis and Baltimore right now. Prices are set by investors who put 25 percent down and carry no mortgage insurance; rents have not kept pace with taxes and insurance. Most listings fail on the first pass.
What actually moves the result
- Down payment. Every dollar of down payment cuts principal and interest and, at 5 percent down or more, drops the annual MIP tier from 0.55 to 0.50 percent. This is the biggest lever you control.
- Rate. A half-point lower rate on the example above saves about $210 a month. Seller credits help only when they buy points.
- Taxes and insurance.Use the tax bill you will actually get after purchase, not the seller's bill with their exemptions, and a real insurance quote. Both are inside PITI.
- The appraiser's rent schedule.The test runs on the appraiser's comparable rents, not the leases in place. Below-market leases do not drag the number down; above-market leases do not lift it.
- Two units instead of three. Duplexes are exempt from the test. Rental income from the second unit can still count toward qualifying.
- Conventional financing. Fannie Mae allows 5 percent down on an owner-occupied two- to four-unit property with no self-sufficiency test, though the rental-income rules and mortgage insurance are different. Worth pricing side by side.
Run it before the offer, not after the appraisal
The appraisal is the expensive way to find out. Send me the listing, the tax bill and a rent estimate and I will run the test the way the underwriter will, in the five states I am licensed in: Illinois, Indiana, Florida, California and Maryland.
Send me the listing Call (773) 290-0452
Questions buyers ask
Does the rent for the unit I live in count toward the test?
Yes. HUD's calculation uses the appraiser's estimate of fair market rent for all units, including the one the borrower chooses to occupy. The 25 percent vacancy-and-maintenance reduction is applied to the total.
Does the self-sufficiency test apply to a duplex?
No. The test applies to three- and four-unit properties only. On a two-unit FHA purchase you can still use the rental income from the other unit to qualify, but the property does not have to cover its own PITI.
Can seller credits fix a failed self-sufficiency test?
Only indirectly. Credits do not change the rents or the loan amount, so they do not change the ratio. If the credits pay discount points that lower the rate, the smaller principal-and-interest payment can move a marginal file from fail to pass.
Is the 25 percent vacancy factor negotiable?
No. HUD subtracts the greater of the appraiser's vacancy-and-maintenance estimate or 25 percent of the fair market rent. Twenty-five percent is the floor, so the most the property can ever count is 75 percent of the appraiser's rent.
Sources: HUD Handbook 4000.1, Rental Income from the Subject Property (three- to four-unit properties); HUD Mortgagee Letter 2023-05, annual mortgage insurance premium rates effective March 20, 2023. Calculator figures are estimates for planning, not a loan commitment. Updated September 2026.