House Hacking In High Cost Area's With An FHA Mortgage & Winning!

[Jerry Padilla]

House hacking with an FHA mortgage can be difficult in high cost area's. Competition is fierce. You have to get ahead of the game and think outside the box to get your offer accepted on the home you dream of. FHA Primary residence in a high cost area, can give you the greatest investment with the lowest down payment. (Only 3.5% down and up to 6% sellers concessions- seller pays towards closing costs and agreed on during negotiation.)

• When it comes to financing, typically clients get pre-approved with a loan officer and when a property is found they submit all of their required documentation along with the purchase offer.
• To get ahead of the game, you can get pre-approved directly through underwriting, giving you a stronger offer than any other financing client who has just been pre-qualified. You would submit all your documentation ahead of time to the loan officer who would then submit to the underwriter, and get cleared through them. This will help you to close quicker, as you can bypass most of the underwriting system ahead of time.
• Offer a large deposit if offer accepted (maybe your 3.5% down along with an aggressive offer.) as you are now pre -approved versus being pre-qualified.
• Write a letter to the seller explaining your desire for the house/neighborhood and why you are the best candidate to purchase their property and to make it to the closing table.

FHA Maximum financing for high cost areas....

FHA Basic High Cost area limits are:

Single - $625,500

Duplex - $800,775

Triplex - $967,950

Fourplex - $1,202,925

Here is a list of counties considered high cost areas and allow for the maximum financing options with FHA.

http://portal.hud.gov/hudportal/documents/huddoc?i...

Here is a link that you can look up the most up to date information;

Here is the site to look up county limits;

https://entp.hud.gov/idapp/html/hicostlook.cfm

Keep in mind......when you are Purchasing a 3-4 unit multi-family with FHA - The full fair market rent determined by the appraiser must meet or exceed the mortgage payment. Also including a 25% vacancy factor.

These California cities are in the High Cost areas for 2015;

Los Angeles, Anaheim, Long Beach, San Jose, Sunnyvale, Santa Clara, San Francisco, Oakland, Hayward, Santa Barbara, Santa Maria, Santa Cruz, Watsonville

These Colorado cities are in the High Cost areas for 2015;

Edwards, Glenwood Springs, Steamboat Springs, Breckinridge

Washington and Arlington - District of Columbia

These Hawaii cities are in the High Cost areas for 2015;

Kahului, Wailuku, Lahaina

The HI counties are included in the high cost areas;

Honolulu, Maui, Kalawao, Kauai

These Idaho cities are in the High Cost areas for 2015; Bailey, Hailey

The NY NJ PA counties are included in the high cost areas;

Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester

These New York, New Jersey, Pennsylvania cities are in the High Cost areas for 2015;

Jersey City, Newark, New York

Elizabeth City in NC 

In DC, VA, MD, WV - Washington, Arlington, and Alexandria

In MA - Vineyard Haven - Dukes and Nantucket

House Hacking With An FHA Mortgage - FHA Financing;

Maximum Financed Properties - 4 including subject!

Inducements to Purchase

• Contributions up to 6% of the sales price from seller towards closing costs.

Credit Requirements & Derogatory Remarks

• Required is 600.
• Minimum of 2 trade lines are required
• No more than $1,000 in disputed collections
• Must be all on time payments in the past 12 months of mortgage history
• No more than $2,000 in collections ........ Medical bills are excluded.
• Minimum of 2 years from Chapter 7 or 13 bankruptcy discharge
• Minimum of 3 years from Preforeclosure, short sale, deed in lieu, foreclosure from discharge date or release date.

Down Payment Requirements

• Minimum down payment into the transaction of at least 3.5%. Gift funds are considered part of borrower’s own funds.
• 60 day history is required to verify the source of the down payment. Down payment can not be borrowed, from any source.
• Gifts may be funded by a family member....... But must be verified by 60 day history, and must be a gift with no requirement to pay back.

Reserve Requirements

• 3-4 Unit owner occupied properties must have 3 months PITI

Three and Four Unit Property

The maximum mortgage amount for 3-4 unit properties is limited, so that the ratio of the monthly mortgage payment, divided by the monthly net rental income does not exceed 100%, regardless of the occupancy status. This is also taking into consideration, a 25% vacancy factor.

• Upfront mortgage insurance premium (UFMIP), and
• Annual insurance premium which is collected in monthly installments

Mortgage Insurance Premium - For 15 year and greater than 15 years.

• 1.75% of purchase price

Annual Insurance Premium

• Greater than 15 years & greater than or = 95% LTV - 0.8%
• Greater than 15 years & less than 95% LTV - 0.85%
• Less than or = 15 years & Grester than 90% LTV - 0.7%
• Less than or = 15 years & less than 90% LTV - 0.45%

High Balance Loan Amounts

• Less than or = to $625,000 & less than or = to 95% LTV - 0.8%
• Less than or = to $625,000 & greater than 95% LTV - 0.85%
• Greater than $625,000 & less than or = to 95% LTV - 0.1%
• Greater than $625,000 & greater than 95% LTV - 0.105%

INCOME—RENTAL

• Any net rental income from the subject property must be added to the borrower’s qualifying gross monthly income by applying 75% of the lesser of;
• Fair Market Rent reported by the appraiser; or The rent reflected on the existing or proposed lease agreement.

History of Rental Income.

When a borrower has a history of receiving rental income from the subject property since the previous tax year, the borrower must provide most recent Federal Tax Returns, including IRS Schedule E, covering the previous two (2) years

FHA Rate and Term Refinance -

Maximum LTV is 97.75%

FHA Cash Out Refinance -

Maximum LTV is 85% of appraised value if property has been owned 12 months or greater, and if less than 12 months from purchase than the lesser of purchase price or appraised value is used

At MB Financial we are a National Lender that goes above and beyond for our clients and I cater to assisting investors with all of their financing needs:

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Credit scores down to 600 on FHA/VA/USDA loans - primary residence only
National lender!

Streamline refinance programs for FHA/VA/Conventional - Save money with less documentation

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Opportunity to increase your business to have more capital available for purchasing and rehabbing

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