Sparta Mortgage News

Self Sufficiency Getting You Down?

January 29th, 2016 11:23 AM by Mary Ann Munro

Are you buying a Multifamily house?

If the answer is "Yes" then keep reading... FHA recently changed some of their guidelines and one that you need to be aware of is the tighter qualifying regulations. Multifamily houses (2 to 4 unit properties) need to be self sufficient which means that the house must "pay for itself" with the projected rental income including the projected rental income for the owner occupied unit.

The Self Sufficiency Test prior to the guideline changes was calculated by taking market rent for all the units and multiplying that figure by 85% which gives you the maximum PITI payment for that house.  Now instead of taking 85% they reduced it to 75%.  This may not seem like a lot but it is deal making or breaking!

Example: Unit 1 $1,000 in rental Unit 2 $1200 and the owners unit would market rent for $1200 = $3400 x 75% = 2550 this means that the total mortgage payment, principle, interest, taxes and insurances (PITI) cannot exceed $2550.  In states like NJ the taxes can send this number soaring!

So if you are looking for a two to four unit property BE AWARE OF SELF SUFFICIENCY!

Mary Ann Munro

Loan Officer

NMLS# 280470

Posted in:FHA and tagged: House Self Sufficiency
Posted by Mary Ann Munro on January 29th, 2016 11:23 AM