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
Buy and bail is the result of buying a new home with the intention of bailing on the old. It is considered mortgage fraud. A Borrower must have 30% equity AND two years of rental income history to use market rents on their current property.
Without a doubt, this is, and probably will be the most personal video I have or will make. I had an epiphany of sorts at the Mortgage Success Source Mastery Business Plan when I saw and met Jeffrey Gitomer.
I made this video mainly so his presentation would stay fresh in my head and to help me strive to have the best year ever. My hopes are that you get the same motivation to have a great year, whatever year, month, or day it is on the calendar.
If you like this video please share, click the like button, etc. and thank you so much for watching!
THE Home Affordable Refinance Program has been “re stringed”
HARP was designed to assist distressed borrowers who are current on their mortgages but “underwater” meaning they owe more than their home is worth.
It’s no surprise several studies identified these borrowers as being likely to strategically default on or walk away from their homes and foreclose.
While regulations won’t be finalized until November 15th the changes to “Harp 2” include -
•Removing the 125 percent loan-to-value.
•Waiving risk-based fees on borrowers who take shorter term mortgages and reducing those fees for others.
•Eliminating the need for a new property appraisal where there is a reliable AVM (automated valuation model) estimate provided by the GSEs
•Eliminating certain representations and warranties required of lenders to obtain the GSE guarantee. This will protect lenders from many of the buy-back requirements they face under current guidelines
•Extending availability of the program through the end of 2013
These changes may allow double the homw owners the opportunity to refinance but still will help only borrowers who are current on their payment and who have loans guaranteed by one of the GSE’s, Fannie or Freddie prior to July 2009. Thus it will impact only a small percentage of underwater borrowers.
Credit Suisse estimates 720k borrowers will be able to refinance which translates to between $2 and $3 billion in interest savings; so HARP 2 will not have a huge effect on the economy or on the real estate market.
To find out if your home is owned by Fannie or Freddie you can contact my team at info@garrick.biz .
The program is set to come out November 15th 2011.
The Buzzz - Watch It | The Buzzz | January 27, 2012 | 
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