Are you thinking of buying a multi-family unit? Did you consider an FHA loan as the financing option? Read the article and find out the requirements.
When single-family investors wish to widen their investment landscape, a multi-family unit is an ideal option. It boosts cash flow and enhances the chances of growing a profitable property portfolio. However, there is one problem faced by investors – financing. If you get started in investment with FHA loans, plenty of chances are waiting for you. So, when you thought FHA loans are only for single-family residences, you did not know your options.
As the mortgage process is as overwhelming as ever, you would have a difficult time to qualify. But the onerous phase turns its face away the moment you are aware of the FHA loan requirements Texas. So, are the requirements similar to single-family homes? How hard do you have to work for what you want? Let’s find all the answers below.
FHA Loans for Multi-Family Units in Texas
Before delving deeper into the proposition, remember that the mortgage stands for owner-occupiers only. The buyer must start using the property within a designated time. Generally, the borrower is bound to reside within 60 days after the closing. The property needs to be owner-occupier for at least a year.
If you are not going to use the other units, you must rent the vacant places. Now, you can inquire about the lender about the nature of rental units. Can your lender include the rental income and make it a part of your debt-to-income ratio? The lender might ask you about your experience of lending a property before.
Credit Score Requirements
The credit score requirement varies as per the lenders’ guidelines, and it is similar to the requirements of a single-family unit. According to the HUD regulations, borrowers can use the program with a minimum of 500 scores. Such a low credit score provides a 10% down payment. If you were going to seek help from a conventional loan, the down payment requirement would be no less than 20% of the appraised loan value. In case you would like to put down less than 10%, you need to have at least 580. A lender overlay works, so ask before you jump.
Down Payment Requirement in FHA Loans
One of the convenient benefits of FHA loans is a 3.5% down payment. The HUD indicates the down payment as the minimum required investment for the buyers. Just as this down payment value applies to the single-family residences, the advantage is no different from the multi-family residences. There is good news, the Federal Housing Administration lets you utilize funds to take care of the expenses. It comes as a gift bearing the upfront investments you have to make. However, the lender only approves the funds from permissible sources.
In the end, the FHA loan programs for multi-family units are not exactly different from the single-family residences. But the loan limits depend on the county you are about to choose. Ask the lender about the loan limits and see whether the option is still viable. So, don’t hesitate to shoot your queries to the lender!
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