Financing in 95841>Question Details

Angela, Home Buyer in 95841

Loan for 220K for 4 plex in citrus heights

Asked by Angela, 95841 Tue Jul 14, 2009

My husband and I want a loan for a four plex is citrus heights for $220K. This will be our first home purcahse and we will be living in one of the units and renting the rest out for additional income. His average credit score is 637and mine is 581. Depending on who we talk to we get different answers on what scores are required for a loan and if it is possible to get a loan with our scores or just with my husband. Our income is stready and we have pay stubs and W2s to verify. Are we hopeless?

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Jeff Marr’s answer
Angela - I just researched your scenario via HUD form 4155, the handbook used for setting certain FHA lending guidelines, here's what you'll need to get approved for purchasing a 3-4 unit property (within the 1-4 unit guidelines):

- you'll need a minimum of 3 months reserves AFTER you covered your down payment/closing cost expenses.
- a minimum 620 score is needed, but you won't get the best rate until your scores are over 660 with most lenders
- when going with a 3-4 unit property, FHA states the rental income has to meet/exceed your total monthly payments for you to be eligible for this purchase. The lender won't actually use the current income, rather they hire an appraiser to estimate these amounts, which are then adjusted downward for vacancies (typically 25%)
- you can verify this yourself at the following site:
http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.…

Pls feel free to contact me if you'd like further clarifications!

best regards, Jeff Marr
Stanford Mortgage
916-947-1312
0 votes Thank Flag Link Sun Jul 19, 2009
Angela,
Anthony might know something I don't know, but my underwriters tell me that you must have a 2 year history managing properties before the lenders will count your rents as income. This is a new guideline within the past 12 - 18 months.

With FHA, they will consider the rental income only to ensure that the property breaks even, which based on the numbers you posted, this 4 plex absolutely does. So that is great news!

Unfortunately, the numbers do not seem to work with your husband's income alone. So my suggesiton is to keep working on your credit. You seem to be making great progress!
Best Wishes!
Julie Thall
0 votes Thank Flag Link Tue Jul 14, 2009
Hi Angela!

Congrats to you for choosing to buy a 4 plex!

Has your current lender has issues with getting you qualified? If it is just a FICO score issue I have lender that will go below 580. I am surprised other here don't.

If your credit score is not an issue it would just depend on your income and job history.

If you want a second or third opinion, please give Todd a call at (916) 549-1190 and he can walk you through your options!

Good luck!

Erin
0 votes Thank Flag Link Tue Jul 14, 2009
My husband middle score is 643 while mine is 580. We have been doing the credit repair since Feb and have seen significant imrpovement but my husbands scores have been improving faster then mine. Income wise I am the higher of the two (last years taxes I was at 51k and he was 32K).
The property is currenlty rented and goes for about 775 per unit.
0 votes Thank Flag Link Tue Jul 14, 2009
Hi Angela,
Yes, it's possible. Here is more info:
1. Of your 3 scores, we use the middle score and not the average. So if you have a 660, 655, and 601 score, we'd use the 655.
2. Are the other units currently rented? If so we can get lease agreements from the current owners since they will transfer to you and count some rental income.
3. 620 is the magic number for credit score for FHA. I know a few lenders who will go down to a 580 with a bunch of additional requirements. Is there anything recent or incorrect on your credit report that you could get fixed to bring it up?
4. Yes your husband could get the loan in his name only. We would only count his income, but FHA requires that we hit all your debts on your credit report against him. Do you think his income would qualify you both?
5. Can do 3.5% down, seller pay closing costs
6. You may be eligible for the first time home buyer tax credit of $8000 if your combined income is less than $150,000, or your individual income is less than $75,000
If you want to chat give me a call or email me directly, I'm local - 916-715-1974, Anthony Lombardo, http://www.hi-techmortgage.com/anthony
0 votes Thank Flag Link Tue Jul 14, 2009
Angela,
FHA did not used to be credit score driven, but in the past 12 months, this loan has also set minimum credit score requirements. 620 is the minimum credit score FHA will accept.

Ed is correct that 3.5% is the minimumn down payment, which is a plus. But like I said in my previous post, the property must cash flow, based on the lender's underwriting guidelines.

Best,
Julie Thall
0 votes Thank Flag Link Tue Jul 14, 2009
Angela,
Most lenders have set the minimum credit score at 620, some even 680. So no, you are not hopeless, but your credit score, and thus you, cannot be on the loan. Each lender has different credit score requirements, which is probably why you are getting different answers.

So the question becomes, can your husband qualify for this 4-plex on his own? Let me give you a general answer to that question. Asusming you are putting 20% down, your monthly principal, interest, property taxes and insurance would be about $1300 - $1400 a month. Assuming no other monthly debt, your husband would need to gross about $3500 a month to qualify.

If you were planning to go with an FHA loan, there are a few more issues that may complicate this purchase. For example, FHA will need assurance that your property will cash flow, which can only be calculated with an appraisal and rental survey on the property. And FHA will require that your credit be run and all of your debt be counted against the total debt-to-income ratio. But since you are not on the loan, your income does not get to count to offset the debt. If you and your husband do not carry debt, then it is a non-issue.

Persevere...where there is a will, there is a way!
Best Regard,
Julie Thall
jthall@rpm-mtg.com
0 votes Thank Flag Link Tue Jul 14, 2009
Angela...

Naw.. you're not hopeless... you're just lacking some information...

If you haven't already, I'd hook up with a loan guy that is familiar with income property...

If you are intending to live in one unit and rent the others, you will qualify for an FHA loan.. which is not really a FICO driven loan.. it's a little differant...and don't get me wrong credit is important... but it's not necessarily based on a FICO score..

You only have to put down 3.5% of the sales price just like a single family home.. which is kind of nice...

Your score is a little low and like I said earlier.. get hooked up with a loan guy and start your application.

I think you folks are making a smart move and I wish more buyers would consider this kind of investment...

If you need references for a loan person because you don't have one.. drop a note and I'll hook you up with one.

I hope this helps...

In the mean time...?

Make it a great day...!!!
Web Reference: http://www.TheDuplexGuy.net
0 votes Thank Flag Link Tue Jul 14, 2009
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