Traditional govt mtge options.. Thoughts?

17 Replies

Hi BP:

I'm looking to finance a SF purchase for myself (owner-occupied). I own 2 properties in FL, both single family, one is FHA, other one is FNMA Conv. Both rented and positive cash flow.

Subject Property:  Traditional detached SF property in NJ

Purchase amt 410k

10% down (don't have funds to do 20% unfortunately)

While I am confident in my mtge guy, for prudent measure I wanted to check w/ the BP community to confirm the following..

  • Freddie:  'My income is too high' (Can certainly give figures, but not sure how to break it down.. 2017 salary + bonus; Rental income, 2018 salary formally approved and documented, but not effective until July; and 2018 bonus (which I have received already)
  • FNMA:  'To get a second FNMA mtge, I need to put down 20%' (which I would like to do, but cannot come up with an extra 41k)
  • FHA: 'My only option' (with the 1.75% upfront PMI and monthly PMI for life of the loan). (I know FHA 15yr doesn't have PMI, but I cannot afford the payment on a shorter duration loan)

Any further detail needed?  Please let me know.  I appreciate any advice or feedback.

Ryan

@Ryan Z. Unless there is information we are not receiving, it sounds like you are getting some misinformation. You shouldn't have an issue buying through either Freddie or Fannie with the scenario you are describing. Some notes to your bullet points:

- Freddie: This sounds like you are talking about Home Possible (a Freddie program for first time home buyers and targeted areas). Through a normal Freddie loan, there are no income restrictions for being too high. 

- Fannie: You shouldn't have an issue putting 10% down. In face, based on the scenario above, I would think Fannie/Freddie are your easiest options (not to mention least costly).

- FHA: I would think this would be the hardest option for you to use. You will have to prove that you have either moved or are moving up in home size compared to the property you already used FHA on. It sounds like that shouldn't be a huge issue but it is an obstacle you would face and there is a level of subjectivity to it.

Maybe there is something missing from your overview but what your lender is telling you does not make sense to me. 

Hopefully this helps. 

@Jeff Dulla  Thank you..  I appreciate the guidance.  Please see my comments below in bold.

- Freddie: This sounds like you are talking about Home Possible (a Freddie program for first time home buyers and targeted areas). Through a normal Freddie loan, there are no income restrictions for being too high.

Yes, Home Possible..  I'm not a first time buyer.. Does this matter?  Area of purchase would be zip 07701 (Red Bank, NJ)


- Fannie: You shouldn't have an issue putting 10% down. In face, based on the scenario above, I would think Fannie/Freddie are your easiest options (not to mention least costly).

Is it possible I'm not meeting a Fannie DTI ratio or something of the sort, and that the same figures meet FHA requirements?


- FHA: I would think this would be the hardest option for you to use. You will have to prove that you have either moved or are moving up in home size compared to the property you already used FHA on. It sounds like that shouldn't be a huge issue but it is an obstacle you would face and there is a level of subjectivity to it.

Understood.  Thanks.


@Ryan Z. - Not just first time home buyers but also low to moderate income buyers and also buyers buying in a targeted area. Here is more on Home Possible:

http://www.freddiemac.com/homepossible/

Here is a lookup to see if your property is in a census tract with no income limit for Home Possible:

http://www.freddiemac.com/homepossible/eligibility...

For Fannie - yes, it is possible your DTI is too high but that would mean the opposite of what you said for Fannie above (the lender said your income was too high).

FHA does have expanded debt to income ratios and is a little more lenient on certain things. That is definitely possible.

@Jeff Dulla Thanks a lot Jeff. 

Freddie:  Based on what I determined from the census tract lookup and program guidelines, the property is located in a 'high cost area', so my income does fall below the upper threshold.  However, I read the following in the FAQ and am having difficulty understanding..  Any idea?

"Can a borrower qualify for a Home Possible mortgage if they own another property?

Yes, the borrower may have ownership interest in another residential property if they do not occupy the property, and the Seller documents that the borrower meets at least one of the following conditions:

  • They inherited an ownership interest in the property and share ownership with another party.
  • They own the property with another person who has been assigned the debt associated with the property by a court order, such as a divorce decree.
  • They are a cosigner or guarantor on a mortgage, and someone other than the borrower has made payments on that mortgage for at least the most recent 12 months."

For Fannie - yes, it is possible your DTI is too high but that would mean the opposite of what you said for Fannie above (the lender said your income was too high).

They informed me my income was too high for Freddie (which looks like it isn't the case).  For Fannie, they just said I couldn't have two FNMA mtge's at once.  However, if I meet the ratios, you think I should be able to get a second FNMA without putting 20% down right?



@Ryan Z. What you are talking about is just for home possible and for home ready. Those are only niche products within Fannie and Freddie guides. You can do a normal Fannie or Freddie loan with as little as 5% down (some 3%), without any of those requirements you are mentioning. 

Is there a reason you are being told you need to go through home possible or home ready?

You can get mortgage with 80/10 if you are going to occupied this property as PR.

Here is what I've determined from my readings.. (Income approx 130k)

I can qualify for Freddie due to 'high cost area' designation, but I cannot have ownership interest in other properties.  

While FNMA shows me the avg med income for the address is 89k.. It appears they do not classify the same area as a 'high cost area', so I disqualify based on my income being greater than avg med income.

I'm certainly not an expert here though...    Please let me know your thoughts

Originally posted by @Jeff Dulla :

@Ryan Z. What you are talking about is just for home possible and for home ready. Those are only niche products within Fannie and Freddie guides. You can do a normal Fannie or Freddie loan with as little as 5% down (some 3%), without any of those requirements you are mentioning. 

Is there a reason you are being told you need to go through home possible or home ready?

 Oh interesting..  Honestly, I thought those were the normal programs, as those were the ones my mtge originator kept mentioning..  I'm going to dig on that a little..  Thx

@Harjeet Bhatti Thank you. I was informed that the rate difference on the 10% portion would be more costly than MI on an FHA w/ 10% down.. Thoughts?

@Ryan Z I don't know your loan scenario like other factors which can add to the rate but if you want to see the difference ask your lender to send you presentation for both products and see the difference. Most of the time it has savings on long run. You have to key in all the factors compare to current product.

@Harjeet Bhatti Gotcha.. Thx very much..

Thanks all.  I appreciate the guidance.

Originally posted by @Harjeet Bhatti :

You can get mortgage with 80/10 if you are going to occupied this property as PR.

You wrote 80/10 - did you mean 90/10 or 80/20?

@Steve Babiak 80% 1st, 10% 2nd and 10% down payment. 

@Ryan Z. The short answer is your mortgage guys is BSing. Find a different mortgage banker.

* 1st BS - You can't have to Fannie mortgages - Fannie allows individuals to have up to 10 financed properties and Freddie 6.

* 2nd BS - Fannie Home Ready and Freddie Home Possible is the only option - These programs are for 1st time home buyers. Since you are buying as owner occupied, you can qualify for a standard Fannie/Freddie 5% down (as long as your DTI supports it).

* 3rd BS - Income limitation - This is related to BS #2 :-). Standard Fannie/Freddie loans don't have income limitations. Income limitations are only on Home Ready and Home Possible.

Good luck.

Learning quite a bit here...  Who is a very good lender in NJ?  Please no direct reach-outs, I'd prefer a solid referral.

And to top it off, in addition to Upen's comment on the financed properties, I'm not sure about Freddie, but Fannie Mae doesn't count the financed properties when getting a primary residence.

So you could already have 10 financed, but if you're purchasing a primary it doesn't matter that you already have 10 investment properties. Also doesn't apply to 5+ unit Multifamilies or lots/land or commercial properties.

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