San Francisco Chronicle - (Sunday)
FHA with 3.5% down helps couple buy 4-unit property
Mortgage advisor:
Brenda Wyatt, All California Mortgage.
Property type:
Four-unit in Lake Merritt area of Oakland.
$1.158 million. FHA. 3.125%.
A prominent Oakland Realtor referred a couple to me as they were interested in purchasing a multi-unit property with little money down. I knew immediately that FHA was the way to go.
FHA only requires 3.5% down on multi-unit property as opposed to the conventional requirement of 25%. The maximum allowable multi-unit loan amount in Alameda County is $1,867,275 and these clients
Loan amount: Loan type: Rate: Backstory:
were well within the guidelines with a purchase price of $1.2 million.
FHA requires multi-unit properties to pass a “self-sufficiency test,” which means the total monthly market rents as determined by your appraiser for all units (including the one the borrower intends to occupy) must exceed the monthly mortgage principle, interest, taxes and both homeowners and private mortgage insurance.
Although the units in the subject property were under rent control, I confirmed that FHA uses current market rents to qualify. The appraiser is required to include these market rents in his report and analysis.
In this case, the appraiser’s assessment of market rents was extremely low and inconsistent with the hot market trends seen in popular neighborhoods like Lake Merritt. The low rents used jeopardized the transaction. The couple was horrified that they would lose the property.
With quick thinking, I and my team prepared a reconsideration of value package for the appraiser. They called local rental agencies, searched listings in the area, analyzed their own data by using online resources and provided their findings to the appraiser. The information provided was so thorough, the appraiser updated the report with increased market rent figures and the client was able to qualify.
The couple closed on the property quickly once the issue was resolved and thanked me for my willingness to go above and beyond the call of duty and fight for them.