Owner-Occupied Property Buyer’s Checklist

A short step-by-step checklist for buying a 2, 3, or 4 unit property to live in and rent out

This checklist covers the main steps and questions to work through before you buy an owner-occupied 2-4 unit property. It is a general guide. Loan programs, local zoning, and tax rules change, and your specific situation may differ, so confirm details with your lender, inspector, and a qualified attorney or CPA before you rely on them.

1. Financing

Confirm which loan program fits: FHA, Fannie Mae HomeReady, or Freddie Mac Home Possible are the main options for owner-occupied 1-4 unit properties.
Check your debt-to-income ratio (DTI) before you shop, since lenders use it to set your borrowing limit.
Ask whether private mortgage insurance (PMI) applies. PMI is generally required on conventional loans when the down payment is under 20%.
Ask your lender how much of the projected rental income from the other units can count toward your qualifying income. It is typically 75%.
Review your down payment options. Some programs allow as little as 3-5% down for qualifying owner-occupied 2-4 unit purchases, subject to income limits.
Get a written pre-approval, not just a pre-qualification, before you make offers.

2. Property and Building Condition

Order a full inspection covering the entire building — structure, roof, electrical, plumbing, and HVAC for every unit, not just the one you plan to live in.
Confirm how many separate systems exist (furnaces, water heaters, electric meters, gas meters) and which ones the landlord is paying for.
If the property was built before 1978, confirm the seller has disclosed any known lead-based paint hazards and provided the required EPA pamphlet before closing.
Verify the number of legal units matches what the county has on record. Confirm with local zoning that the property is legally permitted for the number of units it currently has.
If any unit is an accessory dwelling unit (ADU), ask your lender and appraiser how they will treat it. HUD defines an ADU as a separate habitable unit with its own kitchen, sleeping, and bathroom space.

3. Legal and Compliance

Review the federal Fair Housing Act before you plan to advertise or screen tenants for the other units. It prohibits discrimination based on race, color, religion, sex, national origin, disability, and familial status.
Check your state and local landlord-tenant laws, since they add rules beyond federal law. These vary by location, so confirm with a local attorney.
Confirm the property’s zoning classification (single-family vs. multifamily) matches how it is actually being used. If rental or short-term licenses are required, the seller should already have them.
Review the leases in detail and verify that rents are being paid on time and in full. Payments in cash are a red flag.

4. Numbers to Run

Estimate total rental income from the non-owner-occupied units and compare it to the full monthly housing payment: principal, interest, taxes, insurance, and PMI (if putting down less than 20%).
Understand what goes into your escrow account, since it changes your monthly payment beyond principal and interest.
Budget for closing costs. Title insurance, appraisal fees, and loan origination fees are typically the largest categories.

5. Before You Make an Offer

Confirm in writing with your lender that the specific property qualifies for owner-occupied financing before you waive any contingencies.
Line up your inspector, and if needed, a lead-paint or radon tester, in advance so you are not rushed during your inspection period.
Talk with a CPA about how owning and renting part of the property will affect your taxes going forward. Meet with the attorney you plan to use.