Financing in Phoenix>Question Details

Paul Welden, Real Estate Pro in Phoenix, AZ

Need FHA Lender in AZ who can approve a well-qualified borrower for a new primary residence and he does not have 25% equity in existing AZ property

Asked by Paul Welden, Phoenix, AZ Wed May 11, 2011

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Your borrower must qualify for both homes full PITI plus have 6mo reserves for each home. Preferably a DTI under 50% and a strong credit profile. Not sure if you know the full details but if you feel they are well qualified and fit this scenario, I'd be happy to help!

Leo Zuniga
Web Reference:
0 votes Thank Flag Link Wed May 18, 2011
As you can see, it's not clearcut without addiitonal details. Others have correctly stated that the borrower would have to qualify to carry both properties without consideration of rental income, have adequate residual savings ("reserves") and have a convincing explanation as to why the lender should be convinced that this would be his new primary residence instead of wherever he resides now.

A simple mortgage loan pre-approval would resolve these questions but since you're asking I can only assume that's been attempted already being that wasn't mentioned.

It is true that lenders have "overlays" or additional rules beyond what FHA requires, but everything here is basic to FHA qualification regardless of lender - big, small, local, national or portfolio - none could accept this scenario if the basics are not met. If you feel something was missed in any other
preapproval(s) then feel free to ask any of us to assist in determining if your client qualifies.

Tom Stevens, Loan Officer, Flagstar Bank
Financing in 50 states
0 votes Thank Flag Link Wed May 18, 2011
Just depends on the qualifications of the borrower as they'd need to qualify with both and explain the purpose of the new primary res (bigger? closer to school/work?). Ratios can be up to 57% with compensating factors, meaning good job stability, reserves, credit.
0 votes Thank Flag Link Thu May 12, 2011
I find it interesting that everyone is saying this is a breeze.
It's obvious that Paul is stating that the new purchase is an FHA loan and the old property that is being converted to a rental does not have 25% equity. This means that the borrower would need to qualify for BOTH PITI payments plus have 6 months reserves for each. It's obvious by implication that the borrower in question DOES NOT fit that guideline.

How on earth do you plan to do this? There is no "MAYBE" on this FHA guideline, it's very simple, if you don't have the equity, you cannot count the rental income.

The answers here amaze me more every day!
Web Reference: http://WeFixRates.Com
0 votes Thank Flag Link Wed May 11, 2011
Paul, We can do this transaction as well.

Todd Bookspan, MBA
Cobalt Mortgage
0 votes Thank Flag Link Wed May 11, 2011
It sounds like they already own a home in AZ and want to buy another home. FHA is for owner occupied only, not investors. They will have to convince FHA that it will really be their primary residence. In addition, if they do not have 30% equity in the property they currently own as evidenced by a recent appraisal, they cannot use rental income to offset the mortgage payment.

They will have to show income to support the current mortgage plus the new mortgage with no rental income used in the calculation.
0 votes Thank Flag Link Wed May 11, 2011

The only way this can be done is to have a strong motivation letter from your clients, they must be upgrading property and their income must qualify with ratios under 50% DTI with both mortgages and all other debt. If you feel they have all of these, give me a shout.
Web Reference:
0 votes Thank Flag Link Wed May 11, 2011

Fax: 8662327787
Cell: 602-206-8654

Work Address:4800 N Scottsdale Rd
Scottsdale, AZ 85251
0 votes Thank Flag Link Wed May 11, 2011
Hi Paul!

Unless there is a catch to this... that doesn't sound like a scenario unlike 70% of my recent transactions. Please feel free to call me anytime!

Matthew Remus
0 votes Thank Flag Link Wed May 11, 2011
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