A building you live in is financed as a home
Chicago has two-flats on block after block, from Logan Square and Avondale to Bridgeport and Pilsen, plus plenty of 3-flats and greystone 4-flats. If you'll live in one of the units, FHA and Fannie Mae both treat the building as your principal residence. That means owner-occupant down payments and loan limits on the whole building.
It does take more paperwork. The appraisal uses a different form, and the lender has to work out how much of the rent counts. Both should be settled before you write an offer.
2026 loan limits for a 2-4 flat in Cook County
Conventional loans that Fannie Mae and Freddie Mac buy are capped by FHFA's conforming limits. Cook County is at the national baseline for 2026. Source: FHFA, 2026 conforming loan limits by county.
- One unit: $832,750
- Two units: $1,066,250
- Three units: $1,288,800
- Four units: $1,601,750
FHA's limits are lower. HUD's 2026 floor is $541,287 for one unit, $693,050 for two, $837,700 for three and $1,041,125 for four. Source: HUD Mortgagee Letter 2025-23. HUD's county file puts Cook County at that floor for all four sizes. You can check any county with HUD's FHA mortgage limits lookup.
The caps apply to the loan amount. A two-flat priced above $693,050 can still work with FHA if your down payment brings the loan under the limit.
How much you need to put down
FHA
FHA asks for a minimum investment of 3.5% of the value, so the loan can go up to 96.5%. That applies with a credit score of 580 or higher. With a score from 500 to 579, the loan is capped at 90%. Source: HUD Single Family Housing Policy Handbook 4000.1. The same rules cover a two-flat, a 3-flat and a 4-flat.
Conventional
Fannie Mae's eligibility matrix allows up to 95% loan-to-value on a 2-4 unit principal residence purchase run through Desktop Underwriter, so 5% down. On a manually underwritten loan the maximum drops to 85% for two units and 75% for three or four. Source: Fannie Mae Selling Guide B2-1.2-01, which sets maximum LTVs through Fannie Mae's Eligibility Matrix (August 5, 2026 edition).
Which loan costs less depends on your credit, your down payment and the mortgage insurance each one carries. Ask for a Loan Estimate on both and compare them line by line. We walk through that in how to compare Loan Estimates.
How the rent helps you qualify
Lenders count a share of the rent, not all of it, and FHA and Fannie Mae figure that share differently.
FHA
FHA lets the lender count rent from a 2-4 unit home as income. If you don't have a rental history on the building, the appraiser estimates fair market rent on the small residential income appraisal form, Fannie Mae Form 1025. The lender then uses 75% of the lower of two numbers: the appraiser's rent or the rent in the lease. That amount gets added to your income. It doesn't reduce your mortgage payment. Source: HUD Handbook 4000.1.
Say the upstairs tenant pays less than the appraiser thinks the unit would rent for. FHA goes with the lease, since it's the lower number, and counts 75% of it.
Conventional
Fannie Mae starts with the gross monthly rent, multiplies it by 75%, and subtracts the building's full payment (principal, interest, taxes, insurance and any association dues). What happens next depends on your landlord experience. Source: Fannie Mae Selling Guide B3-3.8-02.
- With 12 months or more of experience managing a rental, a positive result can count in full.
- With less than 12 months, the rent can only offset the payment. It can't add extra income on top.
Fannie Mae also requires the lender to document your current housing payment before any of the building's rent can count. If you've been living with family rent-free, tell us early, because the building's rent may not count at all.
Before you call a building "self-supporting," run the numbers at 75% of the rent and check what the appraiser is likely to say about market rent. Listing sheets often show the rent the seller hopes for.
3-flats and 4-flats: FHA's self-sufficiency test
FHA adds one more test for three and four units. 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% of that rent. The full monthly payment (principal, interest, taxes and insurance) divided by what's left can't be more than 100%. Source: HUD Handbook 4000.1.
In practice the building has to carry its own payment at roughly three-quarters of market rent. Your income doesn't count toward this test. A 3-flat at a high price with modest rents can fail it even when your income would qualify you easily.
FHA also requires you to have reserves equal to three months of the payment (principal, interest, taxes and insurance) left after closing on a 3-4 unit purchase.
Chicago things to check before you write the offer
- Count the legal units. Garden and basement apartments are common in Chicago two-flats, and some were added without permits. An unpermitted unit can cause trouble with the appraisal and with counting its rent. Ask your attorney to confirm the unit count before you rely on rent from a garden unit.
- Get the leases. When a tenant stays, Fannie Mae wants a copy of the signed lease that transfers to you, supported by the appraiser's rent schedule. Ask the listing agent for leases and the security deposit details early.
- Plan for the tax bill. A larger building usually means a larger bill, and the seller's exemptions don't carry over to you. Our guide to how much house you can afford in Chicago shows how a Cook County bill is built.
- Check down payment help by property type. Some programs cover 2-4 unit homes and some don't. Ask before you count on one. Our guide to first-time buyer programs in Chicago has the details for each one.
- Leave time for the appraisal. A 2-4 unit appraisal takes more work, so build that into your closing date. Our rate lock checklist covers when to lock.
See how a 2-flat fits your numbers.
15-minute conversation. Send us a listing or two and we'll show you how FHA and conventional each count the rent and what you'd need to close. No SSN, no impact to credit.
Schedule a CallCommon questions about buying a 2-flat
Can I buy a 2-flat in Chicago with FHA and 3.5% down?
Yes, if you'll live in one of the units. HUD sets a minimum investment of 3.5% for borrowers with a credit score of 580 or higher. In Cook County, the 2026 FHA loan limit for a two-unit building is $693,050.
What is the minimum down payment on a conventional 2-4 unit home?
Fannie Mae's eligibility matrix allows up to 95% loan-to-value on a 2-4 unit principal residence purchase underwritten through Desktop Underwriter, which means 5% down. Manually underwritten loans are capped at 85% for two units and 75% for three or four.
Can I count rent from the other units if I've never been a landlord?
Yes, with limits. With no rental history on the building, FHA counts 75% of the lower of the appraiser's market rent or the lease rent. Fannie Mae counts 75% of gross rent, and with less than 12 months of landlord experience that rent can only offset the building's payment.
What is FHA's self-sufficiency test?
It applies to 3- and 4-unit buildings. Take the appraiser's market rent for all units, including yours, and subtract the larger of the appraiser's vacancy and maintenance estimate or 25%. What's left has to cover the full monthly payment of principal, interest, taxes and insurance.
What are the 2026 loan limits for a 2-flat in Cook County?
For two units, $1,066,250 on a conforming conventional loan and $693,050 on FHA. For three units, $1,288,800 and $837,700. For four units, $1,601,750 and $1,041,125.