Did You Know?

FHA loans are one of the best options for young, first-time home buyers who have not had as much time to save for a large down payment or establish a high credit score.

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Buying Multi-Unit Property with an FHA Mortgage


Buying Multi-Unit Property with an FHA Mortgage
Did you know there are FHA loans that let house hunters buy multi-family properties such as duplexes and triplexes? FHA rules for these transactions fund in HUD 4000.1, including owner-occupancy, require that one unit serve as the borrower’s primary residence.

Some house hunters ask why this rule exists. Some believe the rule serves as a lender risk mitigation strategy.

Being an owner-occupier allows for greater control over property maintenance and tenant relations, reducing potential liabilities. This active role also allows for a greater knowledge of the local market and the ability to adjust rental rates accordingly.

Not all borrowers want a duplex so they can become landlords. But those who do should know some of the intricacies of doing so.

FHA Duplex and Triplex Loan Limits

FHA loan limits, subject to regional market variations, determine the maximum borrowing available with a conforming FHA mortgage. Duplexes and triplexes qualify for increased loan amounts because they have additional living units. Single-unit residences have lower FHA loan limits.

Appraisals and Inspectons

The appraisal process determines the property's basic livability and remaining economic life. A home inspection is a more in-depth look at the condition of the units; do not skip this important step.

If you plan to be a landlord with your FHA loan, your lender may ask you to submit projected rental income, and you may need to show your bona fides as a previous landlord or property manager.

Loan Prep

These loans are riskier for the lender. Credit scores, down payments, and cash reserves are important for these transactions. Higher credit scores yield favorable loan terms, optimizing interest expenses.

Bigger down payments represent your ability to afford the loan and manage interest rate costs. Do you feel your credit isn't as good as you'd like it going into the process? Having a larger down payment could offset some lender concerns.

Issues to Consider

Owning property in a known natural disaster zone can be tricky. Increased dangers of wildfires, tornadoes, tropical storms, and heavy winter weather may force some borrowers to consider adjusting their budgets to include contingency funds, additional insurance, or other protections.

Don't forget to factor in your area's cost of living, maintenance, and routine upkeep of common areas.
  
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FHA Loan Articles

Beyond the Break-Even With FHA Discount Points

In a previous post, we discussed why FHA borrowers should carefully consider whether paying for discount points truly serves their best interests, focusing on factors like short-term homeownership, opportunity cost, FHA mortgage insurance, and the prevailing interest rate environment. Discount points are an option for borrowers willing to pay a fee to lower the interest rate by a set amount. This is not right for all borrowers, and you don't want to pay for points you won't benefit from during the loan term.

Should You Pay Extra to Lower Your FHA Loan Interest Rate?

Are you considering buying a home with an FHA loan? You'll likely talk to your participating lender about FHA loan "discount points" – fees you pay upfront for a lower interest rate on your mortgage. The idea behind discount points is a straightforward exchange: you spend money today to reduce your interest rate. Typically, one point equals one percent of your total FHA loan. In return, your interest rate might decrease by an amount you and the lender agree upon.

Factors Increasing Your FHA Loan Costs

Home loans have various expenses that aren't apparent to a new borrower until much later in the process. What do you need to consider when making your home loan budget? It might not be complete without addressing some of the issues we cover here.

Is Waiting to Refinance Your Residential Home a Good Idea?

While the prospect of lower interest rates or more favorable loan terms can be enticing, there are situations where waiting is the better option. Refinancing without carefully considering your current financial circumstances is never a good idea, but careful planning in the current financial environment is even more important.

Getting To Yes With an FHA Mortgage

First-time home buyers worry about loan approval, but there are important steps to take to increase the likelihood that the lender will approve their application for the loan or pre-approval. What do you need to know before you choose a lender?

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