5% Financing

[Mark Hall]

I am looking over my options of financing. I have been focusing on FHA but the UFMIP scares me a little. I stumbled upon some reading that stated you can put 5% as a down payment, and the loan is not FHA insured. Does anyone have information on what criteria lenders are asking for in order to be approved? FYI I am in the Los Angeles area.

I currently have no debt

700+ credit score

Looking to purchase a multi-family home for around $400,000 to $350,000

I have no renters history

Thank you,

[Albert Bui]

HI Jon, the seller credit can only be used for non reoccurring and reoccurring closing costs and cannot be used to offset the down payment of 5% down so the borrower has to bring in their own money either documented from their own funds or by gift. In the case of loans under 417k in LA county, CA these can be done with all gift even on conventional financing with certain mortgage insurance companies. If you have enough seller credit you can pay off the entire mortgage insurance policy as well for a buyer to make it easier for them to qualify for your home that you're listing (no monthly MI).

@Mark Hall - a lender will look at your 60k income divide it by 12 months to arrive at 5000 per month and multiply it by 45% (max Debt to Income Ratio for 5% down) to arrive at a maximum payment of 2250. This 2250 represents what you can qualify for in terms of mortgage, tax, insurance, and home owner association dues assuming you have $0 monthly obligations (car, student loans, credit cards, boat payment, etc). If you have other obligations you have to subtract them from this 2250 number which could reduce your buying power with respect to sales price.