Economic Stimulus Provides Opportunity
by Kenneth R. Harney
You've probably heard the news that as part of the economic stimulus package Congress has raised mortgage limits for single family home purchasers in dozens of high cost areas around the country to $729, 750 -- up from the previous $417,000.
That should be a big plus for buyers in places like California, New England, the Washington DC metropolitan are and parts of Florida -- at least through December 31, when the stimulus increases terminate.
But there are opportunities here for investors, too, that haven't gotten a lot of publicity. Some of the new, higher limits extend to 2-unit, 3-unit and 4-unit properties, so investors have the chance of acquiring buildings that allow them to live in one unit -- and rent out the rest.
The new FHA jumbo limits are huge: If you want to acquire a two-unit property in a high cost market, the FHA limit is now $934,700. For three unit buildings, the maximum goes to $1.13 million. And for four unit properties, FHA will now back loans up to $1.4 million.
These limits go even higher if you are buying in what FHA calls “special exception” markets -- Alaska and Hawaii, the U.S. Virgin Islands and Guam -- where the two unit limit is now $1.4 million, three units $1.7 million and four unit investments go to $2.1 million.
FHA generally will let you use a large portion of your anticipated rental-unit income to qualify for your loan in the first place. That means you don't have to have a jumbo-sized income to buy a three or four unit building in a high cost local market like San Francisco, Manhattan or Boston.
Your tenants' rental payments will take care of the lion's share of the cost of the mortgage. Like regular FHA-insured loans, two to four unit mortgages come with fixed-rate thirty year terms, require full documentation and solid appraisals.
Unlike FHA, Freddie Mac's jumbo investor loan standards, spelled out in a program announcement this past Wednesday, do not permit two to four unit properties. But they do allow non-owner-occupied single family rental unit purchases up to $729,750.
So take a hard look at multi-unit or single unit rental properties if you're in a high cost area. Thanks to the stimulus package, you might be able to finance bigger, more expensive real estate as an investor than you ever imagined.
Just don't wait around forever to find a property, though. Nail it down before the December 31st Congressional deadline.
Published: March 14, 2008