I have a question about qualifying for FHA when you already own property. I have heard both of these bits of info:
1. FHA requires at least 6 months of mortgage payments on existing property in reserves.
2. Altho they have strict requirements for Single Family HOmes, not true for triplex or investment property as investment property is looked at differently.
3. Is this the scenerio in a conventional loan also? and,How much is really required for a down payment in conventional (I have heard anywhere from 5 to 30%)
I guess some people have gotten a new mortgage and dumped their current one after they have a new loan.
I ask because I own a triplex, and my wife and I would like to buy a SFH in a better neighborhood. We currently live in one of our units, and have had the plan to buy our own home all along. And, what does this change if we go from "owner occupied" to "investment property"
Thanks so much to the great mortage experts writing on these threads.
A couple things would make this easier to answer?
What are your FICO scores
Incomes? (non rental)
Debt items (cc, loans mortgage)
How long have you owned the triplex and how far back can you prove rental income?
How much is the triplex worth/how much is owed?
How much cash do you have avaialable for down payment/reserves?
How much is the house you are looking at buying?
1. FHA does not require any reserves, but if you want to include the rental income for a 1-unit primary-residence-turned-rental you are going to need at least 25% equity when qualifying for a new FHA mortgage. However if you’ve claimed the rental income on your tax return, you are free to continue to use the rental income to qualify for a new purchase without meeting the equity requirement. You can read the full guidelines at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-25ml.doc
2. FHA has the same minimum property standards whether it's a single family residence or a 4-plex. FHA does not do financing on purchases of investment properties, the only time an FHA loan can be used on an investment property is if you already have an FHA mortgage on a home and are refinancing into a new FHA mortgage.
3. Conventional also has an equity requirement, but of 30%, and you would also need to have the reserves that you mentioned in question #1. You’d have to put down at least 5-10% with conventional since you are in a declining market.
FICO Scores - middle one is 710
Income (Teacher HIgh School with 16 years experience) - $85,000.00
Rental Income - currently $3125.00. IF we move, we should get about 4300 total total mortgage payment including taxes and ins is $4400.00 . Will increase by 1200 per month in march of 2017. (interest only for 10 years)
Debt - 55,000.00 in credit with about 8% interest
Triplex is 3years old with steady increase in rental income. I can prove rental income for two years.
Triplex is worth maybe 400 -500,000 but I owe 640,000. It appraised at 750,000. upon completion. That is the big bummer.
No cash available right now for down payment but we should be able to save about $10,000 in the coming year, as we knock out another 10,000 in debt.
We are looking at buying a $300,000.00 house. NOthing picked out yet, we are just trying to get to a prequalify.
Triplex is in National City, Ca.