What You Need to Know About FHA Loans
For those seeking multi-family properties, Federal Housing Administration (FHA) loans provide an easier way to finance this purchase with fewer qualifications and increased flexibility. Since 1943, the Federal Housing Administration has insured approximately 47,205 multi-family project mortgages while increasing in popularity and success. The FHA is under the U.S. Department of Housing and Urban Development (HUD and is currently the largest insurer of mortgages in the United States. One benefit, in particular, is that the FHA will issue a claim to the lender providing a better deal to borrowers while also shielding lenders from potential risks of borrower default.
Hunt Mortgage Group is an experienced FHA/HUD lender and provides FHA multi-family loans in addition to benefits such as exclusive deals and premiums for investors seeking multi-family financing.
FHA Loan Requirements
FHA loans provide a less stringent credit requirements in terms of liquidity and net worth than other agencies. For multi-family properties consisting of 5 or more units, FHA has significantly lower requirements allowing faster approval for the loan. The minimum credit score is 650 for the key principal managing the sponsorship realty entity.
FHA Multi-Family Loan Terms
As far a refinance terms, the HUD 223(f) is the best game in town. For a typical market rate building, HUD allows for an LTV/LTV of 85%. If cash out is sought, this gets reduced to 80%, which is 5% more than both Fannie and Freddie.
Additionally, the loan terms are far superior with a 35-year term, amortizing over 35 years. Further, the interest rate on the loans is typically 60 basis points or lower than those of its agency competitors.
Figuring out where the best deal is simple when a borrower utilizes two amortization schedules. Using one with a 30-year term and amid 4% interest rate for a typical agency deal, verse a HUD/FHA deal with a 35-year term and amid 3% interest rate, the monthly and annual debt service payment difference is staggeringly different. A HUD/FHA deal wins every time.
Further, from a debt service perspective, the threshold tests for an FHA loan are also the best around. The minimum debt service coverage ratio (DSCR) for a refinance is 1.176. This is nearly 7.5% lower than the equivalent Freddie and Fannie programmatic requirements. On top of this, there is no stressing the appraiser’s capitalization rate or the closing interest rate. The market capitalization rate is taken as is.
Advantageous Prepayment Terms
All FHA loans are prepayable over a 10-year period, and always feature a step-down structure, which may or may not have any lockout period. Thus, there is no worry about a defeasance issue.
Streamlined Refinancing A(7)s
FHA refinancing, which is a refinance of an existing HUD loan. It allows borrowers to save money with lower interest rates and mortgage insurance. There is no appraisal required and many closing costs can be mortgaged. Free to contact our advisors at Hunt to get a free sizing and to be quoted at a competitive rate.
New Construction Program
Through the HUD/FHA program, a New Construction Deals can be financed up to 85% LTV/LTC and at a 1.176 DSCR. Creating an experienced team, and working with an accomplished HUD lender is pivotal to having these applications approved. Please feel free to reach out to your Hunt representative for more information.
Apply for an FHA Loan Today
With a rising mortgage rate requirement, easier accessibility as well as flexibility, FHA loans have become more popular than ever, especially for first-time investors. The experts at Hunt Mortgage Group have over 40 years of experience providing clients with negotiations and pricing through reputable relationships with Fannie Mae, Freddie Mac and FHA. For advice on purchasing a multi-family property with an FHA loan, as well as other multi-family financing options, contact Hunt Mortgage Group today!
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