High Cost Area FHA Financing & Maximum Mortgage Limits

House hacking with an FHA mortgage can be difficult in high cost area's.

Competition is fierce. You have to get ahead of the game and think outside the box to get your offer accepted on the home you dream of. FHA Primary residence in a high cost area, can give you the greatest investment with the lowest down payment. (Only 3.5% down & up to 6% sellers concessions- closing costs paid by seller and negotiated on at time of negotiation.)

• When it comes to financing, typically clients get pre-approved with a loan officer. When a property is found they submit all of their required documentation along with the purchase offer.
• To get ahead of the game, you can get pre-approved directly through underwriting, giving you a stronger offer than any other financing client who has just been pre-qualified. You would submit all your required documentation ahead of time to the loan officer who would then pass this on to the underwriter, proceeding to get you cleared by underwriting prior to the offer, rather than after, for a specific maximum price. This will help you to close quicker, as you can bypass most of the underwriting system ahead of time.
• Offer a large deposit if offer accepted (maybe your 3.5% down along with an aggressive offer.) as you are now pre -approved versus being pre-qualified.

Keep in mind......when you are Purchasing a 3-4 unit multi-family with FHA - The full fair market rent determined by the appraiser must meet or exceed the mortgage payment. Also including a 25% vacancy factor.

You are also limited to a maximum of 7 units total including subject and investment properties!

These California cities are in the High Cost areas;

Los Angeles, Anaheim, Long Beach, San Jose, Sunnyvale, Santa Clara, San Francisco, Oakland, Hayward, Santa Barbara, Santa Maria, Santa Cruz, Watsonville

The CA counties are included in the high cost areas;

Alameda, Contra Costa, Los Angeles, Marin, Orange, San Benito, San Francisco, San Mateo, Santa Barbara, Santa Clara, Santa Cruz

These Colorado cities are in the High Cost areas;

Edwards, Glenwood Springs, Steamboat Springs, Breckinridge

The CO counties are included in the high cost areas;

Eagle, Garfield, Pitkin, Routt, San Miguel

Washington and Arlington - District of Columbia

These Hawaii cities are in the High Cost areas;

Kahului, Wailuku, Lahaina

The HI counties are included in the high cost areas;

Honolulu, Maui, Kalawao, Kauai

These Idaho cities are in the High Cost areas;

Bailey, Hailey

The ID counties are included in the high cost areas; Blaine, Camas, Lincoln, Teton

The NY NJ PA counties are included in the high cost areas;

Bergen, Essex, Hudson, Hunterdon, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset, Sussex, Union, Bronx, Dutchess, Kings, Nassau, New York, Orange, Putnam, Queens, Richmond, Rockland, Suffolk, Westchester

These New York, New Jersey, Pennsylvania cities are in the High Cost areas;

Jersey City, Newark, New York

Elizabeth City in NC with counties of Camden, Pasquotank, Perquimans

In DC, VA, MD, WV - Washington, Arlington, and Alexandria

In MA - Vineyard Haven - Dukes and Nantucket

House Hacking With An FHA Mortgage - FHA Financing;

FHA Standard Loan Amounts

- Maximum loan amount as determined by FHA (Conforming Loan Limits depending on location and number of units - below)

- Each county has its own individual area ceiling limit, and can be found here;

FHA Loan Limits

House Hacking With An FHA Mortgage - FHA Financing;

No Maximum Financed Properties

This is an Owner Occupied Mortgage Product.

Inducements to Purchase

• Contributions up to 6% of the sales price from seller towards closing costs.

Down Payment Requirements

• Minimum down payment into the transaction of at least 3.5%. Gift funds are considered part of borrower’s own funds.
• 60 day history is required to verify the source of the down payment.
• Gifts may be funded by an immediate family member....... But must be verified by 60 day history, and must be a gift with no requirement to pay back.

Reserve Requirements

• 3-4 Unit owner occupied properties must have 3 months PITI

Three (3)- and Four (4)-Unit Property - Must meet the Self Sufficiency Rule Below!

The maximum mortgage amount for 3-4 unit properties is limited, so that the ratio of the monthly mortgage payment, divided by the monthly net rental income does not exceed 100%, regardless of the occupancy status. This is also taking into consideration, a 25% vacancy factor.

Fee's associated with FHA Financing;

Upfront mortgage insurance premium (UFMIP), and

Annual insurance premium which is collected in monthly installments

Upfront Mortgage Insurance Premium - For 15 year and greater than 15 years.

• 1.75% of purchase price

Annual Insurance Premium

• Greater than 15 years & greater than or = 95% LTV - 0.85%
• Greater than 15 years & less than 95% LTV - 0.80%
• Less than or = 15 years & Greater than 90% LTV - 0.7%
• Less than or = 15 years & less than 90% LTV - 0.45%

Annual Insurance Premium For Higher Balance Loan Amounts - Greater than $625k

• Greater than 15 years & greater than 95% LTV - 0.105%
• Greater than 15 years & less than or = to 95% LTV - 0.1%
• Less than or = to 15 years & greater than 90% LTV - 0.95%
• Less than or = 15 years & less than or = to 90% LTV - 0.7%
• Less than or = 15 years & less than or = to 78% LTV - 0.45%

INCOME—RENTAL

• Any net rental income from the subject property must be added to the borrower’s qualifying gross monthly income by applying 75% of the lesser of;
• Fair Market Rent reported by the appraiser; or The rent reflected on the existing or proposed lease agreement.

History of Rental Income.

When a borrower has a history of receiving rental income from the subject property since the previous tax year, the borrower must provide most recent Federal Tax Returns, including IRS Schedule E, covering the previous two (2) years

FHA Rate and Term Refinance -

Maximum LTV is 97.75%

FHA Cash Out Refinance -

Maximum LTV is 85% of appraised value if property has been owned 12 months or greater, and if less than 12 months from purchase than the lesser of purchase price or appraised value is used.

For an FHA 203k loan refer to this link;

FHA 203k Financing

STATES WE LEND IN:

Alabama, Alaska, Arkansas, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

This information is accurate as of the time of posting. Please also verify the accuracy of this information at the time you are considering these options as guidelines change.