Why Choose FHA?
Because the terms available through FHA are better than most other conventional financing sources.
Favorable Terms Include:
- ‣ Fully amortizing loan terms between 35 and 40 years with no call or balloon provisions.
- ‣ Consistently low interest rates
- ‣ Non-recourse with no personal guarantees required
- ‣ High loan-to-value limitation of 83.3%
- ‣ Low debt service coverage of 1.20x on refinances/acquisitions and on new
- ‣ Loans are fully assumable with HUD’s consent. The assumption of an existing FHA loan
can translate into a higher sales price at a later date.
- ‣ Establish a replacement reserve account with an initial deposit to ensure that capital
improvement items can be completed as needed (this can be funded out of
Busting Common FHA Myths
- • FHA requires low-income units
NOT TRUE. FHA insures properties covering the entire range of the spectrum, from low-income to upscale urban/suburban properties. Low-income set-asides are essential ONLY if a borrower brings the requirement to HUD through tax credits, a bond issue, or other local municipal restrictions.
- • FHA controls an owner’s rents and profits
NOT TRUE. Initial underwriting is based on current market rents, and an owner is expected to raise or lower rents in response to that particular sub-market.
- • FHA provides the loan money
NOT TRUE. Cosmopolitan is the lender. FHA provides the mortgage insurance that guarantees principal and interest payments to investors in the event of a default. Cosmopolitan obtains a loan commitment insured by FHA and funds the loan through the secondary mortgage market.
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