FHA Loan details and questions

[Colby Zeller]

Now that I have found the market I want to invest in and also the property type I settled on looking for, I am intrigued to learn more about the type of loan I need to qualify for. I want to purchase a small multi-family property in the next 6 months and to use the house hacking method to its full potential. When the time comes for me to go to a lender to get approved for this loan what exactly are they looking for ? I know what all lenders look for when debating to approve a person but is there any special thing specifically for a FHA ? Comparing a FHA loan to a conventional what things differ in contrast when looking to get approved by a lender ?

[Bradley Showalter]

Good Afternoon Colby! There are several factors that go into play such as Credit Score and what shows up on the credit report. I personally would say this is the main factor is the score, most time if the score is above 700 we could look at a Conventional Program such as HomeReady or HomePossible that would allow you to do this house hack with as little at 5% down

If the Credit score is under 700, then we would look at the FHA route with as low as 3.5% down. FHA typically has lower interest rates offered compared to conventional, but you will carry private mortgage insurance (PMI) for the life of the loan if you put less than a 10% down payment, conventional requires PMI until you reach 20% equity in the home.

I would keep an eye out for a lender that could get you a verified approval letter that has been reviewed by an underwriter so that you can ensure you can move forward with whatever loan option the loan officer and you discuss.