New Home Buyers should consider buying Owner Occupied Multi Family (2-4 units) with an FHA Loan. For discussion purposes the following suggestions/assumptions are made in this article.
- The Duplex/Triplex/Four Plex will be owner occupied for primary residence
- This means one of the units needs to be occupied by the borrower.
- Credit score assumed is over 620 + Fico
75% of the rent is added to borrowers income when calculating the loan qualification.This means you are now benefitting with the rental income to qualify for a larger loan. The down payment needed is still 3.5% .Closing costs credits can be paid by seller upto 6%.Collections/chargeoffs may be OK as long as FICO is over 620 and Desktop underwriter approves the file.Please read other articles on FHA Home Loan Income calculation,FHA Home Loan credit requirements and calculating FHA Home Loan front and backend ratio on our web site. Example : Property : Four Plex Rent from Units :
- Unit1: owner Occupied
- Unit 2:$800
- Unit 3:$700
- Unit 4:$600
Borrowers Income: $48000 per annum Borrower Monthly Debt
- Monthly Auto Loan Payment :$250
- Minimum Monthly Credit card Pmt $150
Borrower FICO: 620 Down Payment:3.5%
Qualified Purchase Price :$320000.
So with a 3.5% down payment a borrower can qualify to purchase a 4 plex worth $320000..
This is an excellent way to build residual income for retirement. After the loan is paid off the rental income is for you to keep.As the years go by the rental income will keep rising and the loan will keep reducing to a point where you just have the income with no mortgage to pay.
We write articles covering a wide range of topics ,on a regular basis , on Loan Qualification for FHA Home Loan,VA Mortgage Loans,USDA Home Loans and Conventional Home Loans.The articles are available on our website and HomeSearchFinderBlog.com.
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