Scenario analysis | Money down and income to hit DTI FHA conforming loan

[Dominick Persino]

Hello,

First time poster. Looking to make sure my numbers line up. Looking at a 4 unit in Cicero, Illinois.

Property cost $270,000

Total debt is about $1000/month

Mortgage if min down payment FHA (3.5%) seems to be about $1700
Total debt = $2700

4 units currently renting month to month.

Unit 1 $850

Unit 2 $850

Unit 3 $750

Commercial space $1000

Taking the 3rd unit as primary resident.Leaves about $2000 in qualifying rental income (property is self sufficient) @ 75%.
Total debt -$2700 - $2000 in qualifying rental income = $700 remaining debt coverage.

In theory, less than 50% DTI would hit the target @ showing about $20,000 gross income per year?
.....
This seems low but, my math should equate.

Cash reserves. I don't know bank statements shows cash to close and nothing more , if that's an issue. I assume lender want to see a few months left in the bank to cover the mortgage....Any thoughts on this?

Finally anyone know if there is down payment assistance on Mix-use 4 units? Loan, grant, or otherwise...in Illinois.

I found Chase $5,000 but, thats it. IDHA does not seem to specifically state 4 units not being eligible....

Best case scenario as cash to close would be about $6,000 if seller concession on closing cost (offer 270,000 but seller covers closing), $5,000 chase grant. Then you have escrow on 1 quater of property tax and 1 year of insurance.

Am I missing anything or getting anything wrong in this scenario?

Appreciate your input.

[Zack Karp]

@Paul De Luca thanks for the tag

@Dominick Persino your math and understanding of DTI and SST are a little off.

This property should pass the SST. You take 75% of the rents of ALL 4 units, and that must be greater than the PITI.

For the DTI though, this depends on your personal income. If your income is $20K per year, and you have $700/mo in liabilities, then you will not qualify with DTI. I am not sure if I'm understanding that part correctly though.

FHA requires 3 months PITI reserves on 3-4 unit properties. This can also come from a 401K/retirement accounts, it doesn't need to be cash.

Feel free to reach out if you want to discuss further. I can also explain your options with IHDA and any other down payment assistance.