For the past couple weeks mortgage rates have been inching up. That changed today, January 25th 2012 when we saw a huge rally in interest rates largely in part to the FOMC statement that rates are staying low until “late 2014”!!!
Let’s flashback to the December 13th meeting…
“The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
Now this week, January 25th meeting…
“The Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
According to RateAlert’s David Shirmeyer outside of a dramatic failure overseas we shouldn’t see rates go much lower than where they are. That being said we shouldn’t see rates getting much higher either thanks to the fed announcement.
Mortgage rates are once again at all-time lows! While mortgage interest rates certainly don’t seem like they will go higher overnight there is more risk than reward in waiting once rates get below 4%. Lenders get very busy when rates are this low and often times raise rates just to slow down the volume.
To request accurate information including a quick rate quote online visit www.garrick.biz
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Are you a first time homebuyer interested in purchasing a 3-4 unit property in Alameda? Good news, with FHA financing you can do just that with a 3.5% down payment! Following are some of the guidelines for qualifying for this financing:
For starters, the property has to be your primary residence- meaning that you must live in one of the units.
Three to four unit self-sufficiency test:
The maximum mortgage for three and four unit properties is limited, so that the ratio of the monthly mortgage payment, divided by the monthly net rental income does not exceed 100 percent, regardless of the occupancy status.
• The monthly mortgage payment calculation for three and four unit properties includes the following:
Principal, interest, taxes, insurance (Principle, Interest, Taxes, and Insurance – PITI), including monthly mortgage insurance, and homeowner association dues computed at the note rate, if applicable.
• Net rental income for three and four unit property is calculated using the following formula
⇒ the appraiser’s estimate of fair market rent from all units, including the unit the borrower chooses for occupancy, and
⇒ minus the greater of the appraiser’s estimate for vacancies, or
⇒ vacancy factor used by the jurisdictional HOC.
This net rental income calculation is used to determine the maximum loan amount.
In layman’s terms, the total rents must be the same or greater of the total monthly mortgage payment, to include taxes, homeowners insurance, and the mortgage insurance. These rents must be determined by an FHA certified appraiser- meaning that you can’t use rental leases for this specific test.
So here is the biggest problem with writing an offer on a 3-4 unit building using FHA…
You don’t know what the building qualifies for until you receive the appraisal. In speaking to a few account executives for mortgage banks regarding this issue we believe a good rule of thumb is to use the standard ratio for conventional rental income. That is 75% of the gross rents.
For example if a building grosses $400, take 75% of the income, $3000 and the Principal, Interest, Taxes, and Insurance must be no more than $3000. a month.
Borrowers must still qualify for the mortgage based on:
⇒ income
⇒ credit
⇒ cash to close, and
⇒ projected rents received from remaining units.
⇒ 3 months reserves of borrower own funds (cannot be a gift)
Projected rent may only be considered gross income for qualifying purposes. It cannot be used to offset the monthly mortgage payment.
You still need to also qualify with the normal debt-to-income ratios in regards to your income, in which you can use the rental income. But you can only use 75% of the rental income for the purpose of this qualification. As the primary borrower, you can’t use what you would pay for that unit as rent to offset your mortgage. All you are including in order to qualify is your monthly gross income.
Feel free to contact The Werdmuller Group for any questions on the housing and finance markets!
Wendy Werdmuller, NMLS# 242612, info@garrick.biz, 510.846.3006
The Buzzz - Watch It | The Buzzz | January 27, 2012 | 
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