First Real estate agent I spoke with said I can't do FHA?

20 Replies

Well I just started looking for a agent in the Orlando area today and the first one I spoke with told me I can't use a FHA loan to buy a multi family property? Am I missing something here Everywhere Ive read it says I can??

Must be 2-4 units and you have to "live" in one unit for at least a year. Are you leaving any additional information out that could have caused them to say that?

I wouldn't work with that agent unless there's more info to be told.

Yes you can. What's your background? Do you currently have a mortgage that you're living in? Talk to a mortgage broker. I'm doing the same thing right now.

The conversation was brief about 30 seconds and she asked what area and how much I was comfortable spending. I told her the Orlando area mentioned st cloud and said I was looking for a multi family property and I wanted to do a FHA loan. She said there was a lot of competition in st cloud and said I cant buy a multi family property with a fha she said she couldn't help me that's as far as the conversation went lol? Should I be looking for a mortgage broker first? then a realtor?

@James Roux  Talk to a mortgage broker first and let them tell you what you are approved for.  

@James Roux

#1---Keep in mind that real estate agents are NOT in the mortgage business;

#2---the agent you spoke with needs to go back to RE school; the school "exposes" you to types of loans, but do not prepare agents to be loan originators; IMO, this particular agent is either new/inexperienced or too lazy to learn how to be a professional.

#3---Search for a loan broker; then an agent who sells $2M+/year (this agent knows their business!)---call the county Board of Realtors and ask who the top 5 realtors were last year, and then interview them for your business!

Happy investing!

@James Roux I've had the same experience in the past. It seem some Realtors don't like working with FHA financing as it can sometimes take extra time to close - making your offer less desirable to the Seller. However, I have not found this to be true. I closed a FHA loan in 22 days.

MF 2-4 units (as long as you are living in one of the units) qualifies for FHA financing. Actually some of the rental income can even be applied to help you qualify for larger loan amounts.

Talk with a direct lender that understands HUD requirements, get pre-approved and get lender involved with your realtor to explain your income and credit strength.

Good luck!

@Margaret B had some great advise!  

Another idea; ask your lender for a referral or two from past realtors they've done FHA MF deals with. This will guarantee you get what you're after.

Cheers!  

Hi James,

I think Jason Clark nailed it - This realtor doesn't want to "hassle" with a FHA loan. The clue was in your description, "St Cloud is red hot right now". FHA loans get a bad rap because they usually take longer to close and RE Agents don't want to lose a deal because another buyer has cash or conventional funds ready to go. I'd say find another RE agent.

You SHOULD have no issue getting FHA to finance a 2-4 unit. What your realtor may be telling you is that in the area you are looking for a property in is tricky. If the area is really competitive sellers can be more demanding in what they want. Some properties CANNOT be FHA financed due to the more strict inspection the property has to pass. Some sellers don't want to deal with that hassle. We ran into this shopping for a personal residence.

@James Roux To clarify, did you tell her you plan on living in one of the units? That IS a requirement for an FHA. Or, maybe she thinks FHA is only for a SFR.

I think Ryan D. is actually the one who nailed it.

Before everyone jumps on the agent for being stupid, lazy, etc. You need to think about the context in which this statement was made.

You may very well be allowed to use an FHA loan for the purposes of an owner-occupied MF, but that doesn't mean you'll have the opportunity. From my perspective, the agent was trying to tell you you can't use an FHA loan to get into MF in that area because the market is to flushed with better buyers and/or cash investors.

If I had a client come in and say they wanted buy in the sub-$150k range in South or East Austin using an FHA loan, I would tell them exactly what that agent told you. Either we have to figure out a way to get you into a different loan product or change areas. Their job is to get you closed on a property, not just show properties and write offers.

Just my perspective, all about context.

oh she knew I said to her are you sure that I can't finance it with an fha I plan to to live in it I really believe she just wanted nothing to do with me

I'm gonna go see a broker and see what I get approved for first question is tho there's a time line that approvals is only good for right? I'm hoping to be out of my apartment by July agust is this to far away?

@Patrick Connell I can understand the importance of a better loan option then Fha I was just really trying to minimize my out of pocket for my first buy.

@James Roux , you could very well be right. I'm not real good at sugar coating so hopefully this doesn't come off worse then it's meant to, but an "investor" without money to play with, little to no experience, working with an FHA loan isn't the most attractive investor client to work with.

Someone mentioned finding the top 5 producers in an area, those people aren't gonna want to play either. Your best bet is to find a name-brand brokerage and hire one of their newer agents, someone who has the support in place and is hungry for business.

Any decent loan officer should be able to turn out a new pre-approval letter within an hour any day of the weak; use a local lender if you can.

As far as cash out of pocket, there are currently a lot of good conventional loan products out there that only require 5% down, which isn't a heck of a lot more than 3.5%. Some of them even come without PMI so your payment would actually be lower then with an FHA.

@James Roux

Look on here for guys in your area who are Real Estate Agents/Investors. I did just that to track down a house out of state. The gentleman walked the property for me, haggled for me, gave me the name of his banker (who got me approved with FHA), and his insurance guy. I would not be closing on a house in 2 weeks without him.

@James Roux

I understand that FHA terms don't change that much, but I have talked to multiple loan officers and some know little things that others don't. Best thing to do is call a couple lenders and go through the scenario. Just like agents one may more a little more than the other. The agent if interested at all should have mentioned that to you and maybe sent you a couple examples to send to the lender. Would not have taken that much more of there time.

Originally posted by @Jason Clark :

@James Roux I've had the same experience in the past. It seem some Realtors don't like working with FHA financing as it can sometimes take extra time to close - making your offer less desirable to the Seller. However, I have not found this to be true. I closed a FHA loan in 22 days.

MF 2-4 units (as long as you are living in one of the units) qualifies for FHA financing. Actually some of the rental income can even be applied to help you qualify for larger loan amounts.

Talk with a direct lender that understands HUD requirements, get pre-approved and get lender involved with your realtor to explain your income and credit strength.

Good luck!

That is true Jason you can use the income to help qualify but more importantly the income or determined market income of the 4 units assumed all be rented has to exceed the full monthly mortgage nut of the entire building in lending we call it PITIA or principal/interest/taxes/insurance/assessments. This is a FHA/HUD requirement on FHA financing. I believe its called the sustainability rule to ensure the building could sustain itself in the event HUD probably has to take it back.

With regards to qualification yes you can use 75-85% of the income to qualify as income but not "netted," against the monthly obligation. The amount of income depends on the HUD jurisdiction a property is in and in orange county, CA its 85% of gross income and other areas it may be different.

However, I've found atleast for OC that the sustainability rule is hard to meet since prices are so high the PITIA is often times higher than the rents of all four units per month with FHA PITIA payment.

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