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The majority of FHA mortgages in New Jersey and elsewhere are issued for single family residence properties.  However, a lesser known fact is that FHA mortgages are available for multiple unit properties, as long as the property has no more than 4 units.  In keeping with the principal residence guidelines, one of the units must be occupied by the borrower.  This is a great financing option for first time home buyers in New Jersey.

3 and 4-unit properties, regardless of occupancy status, must be self-sufficient.  This means that the amount of the mortgage is limited so that the monthly payment does exceed the amount of expected rental income.

The monthly payment is defined as principal, interest, taxes and insurance (including mortgage insurance).  Also included are any homeowner’s association dues, all computed at the note rate.

The expected rental income is the appraiser’s estimate of fair market rent for all units, including the unit chosen by the borrower for occupancy, less the FHA’s allowance for vacancies and maintenance.  If the local FHA office has not established a separate allowance, then the allowance amount is deemed to be 25%.

The calculation is only used to determine the FHA maximum loan amount.  The borrower must still qualify for the mortgage based on income, credit, cash to close, and the pro jected rents received from the remaining units.

For more information, visit http://www.hud.gov

New Jersey FHA Mortgage Highlights:

Low down payment – The minimum down payment is 3.5% and the money could come from a family member.

Low interest rate – FHA mortgages allow for a smaller down payment and lower credit scores, but still usually offers a lower interest rate.

Less than perfect credit – Those with credit problems, even a bankruptcy, may be able to qualify for an FHA mortgage loan.  The FHA mortgage program puts more emphasis on income, length of employment and job security than do lenders of conventional loans.

Higher ratios – FHA mortgage loans allow higher debt-to-income ratios.

No prepayment penalty – FHA mortgages do not allow prepayment penalties, which some conventional loans require if you pay off the loan early.

Multi-unit properties – FHA loans are not just for single-family homes and condos. They are also available for 2- to 4-unit multi-family complexes.

Closing costs – FHA mortgages allow closing costs to be included in the loan as long as the borrower qualifies for the higher amount. Most conventional loans require that closing costs be paid for at the close of escrow and not be part of the amount loaned.

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I hope you have enjoyed this blog.

Until next time,

Tony
201-943-6800

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