Challenge with FHA appraisal in NJ 3 Family

[Daniel Gonzalez]

Current Situation: I have identified a 3 family in New Jersey where I have planned to use an FHA loan I am pre-approved for. After speaking with my lender, I learned it likely won't pass underwriting because current rents do not support requirements set by FHA. FHA needs 75% of the rent to cover the mortgage. One unit is currently vacant. The second unit has a section 8 tenant and is currently below market. This tenant is month to month and can be given 60 days notice to leave so we receive it vacant (double checked to make sure and it's legal). The third unit has just started an eviction process and is also renting below market. Even asking for all units to be vacant won't work with the underwriter as I understand they only look at the property based on the current situation.

I explored the Freddy Mac 5% loan product but it won't work as I make too much money. The standard Fanny 20% down is not an option; not enough money.

Does anyone have any advice on other options we can explore or other ways to work this deal? I would love to grab this one but struggling to see how I can make it work. 

[Mike McKeown]

This is called "self-sufficiency test" and FHA requires it on all 3 and 4 unit properties. If the units are vacant we use the current market rent as determined by the appraiser. If the appraiser tells us that it would rent for $2,000 a month then that is what we use. It is possible I can get this to work for you but I would need more information.