Ruth's Blog: FHA Loans in Denver

FHA Loans in Denver

Maximum FHA loans in Denver can go as high as $406,250 for a single family home making FHA loans  viable financing vehicles even if it's NOT your first home.

If you look at the chart below, you'll see the average price in the Denver area is well below the maximum amount established for FHA loans:

Denver Recently Sold Homes

Many times FHA loans are mistakenly thought of as just a first time homebuyer option. Why? Probably because of the low down payment requirements, low FICO score requirements, and even lower asset requirement. Read FHA LOANS for more qualifying details.

But that doesn't mean buyers can't have higher than the minimums to make FHA loans their best bet! Probably the only time you might want to consider conventional loans over FHA loans is when you are thinking about putting 20% or more down to avoid mortgage insurance. BUT WAIT... is that what you really want to do? Did you know it's much more difficult to pull money out of the house with a refinance than it is to simply qualify for the higher loan amount with your initial purchase? And more costly, because even though some companies advertise "no cost refinances", there really is no such thing.

Another frequently forgotten fact is that FHA loans can be used to buy a duplex, tri-plex or even 4-plex property. As long as the buyer intends to occupy one of the units! The more units, the higher the maximum loan amount (still requiring just 3.5% down payment). Here's an example of the limits for FHA Loans in Denver county:

Maximum FHA Loans available on Two unit dwellings: $520,050

Maximum FHA Loans available on TriPlex properties: $628,650

Maximum FHA Loans available on FourPlex units: $781,250

So, I ask you, where else can you get financing for a duplex, triplex, or four plex with only 3.5% down payment except using one of the FHA loans as described above?

Let's do a few comparison options between conventional loans and FHA loans. Buying three investment properties using conventional financing with an average sales price of $150,000 would require a down payment of $90,000. (Typical investor down payment is now 20% per home due to the current limitations that mortgage insurance companies no longer are willing to insure investment properties.)

Now let's consider buying a four-plex unit, occupying one of the units and applying one of the available FHA loans on the entire building. Even if the average sales price was still $150,000 per unit, which is not likely as the land cost alone would be much lower on a four plex vs a single family dwelling. But let's just say for the sake of comparison the total purchase price was $600,000, down payment for an FHA loan would only be $21,000! Not only do you have a substantial savings in your down payment that is considerable, but you have rental income from three properties that will help offset the monthly housing payment.

It's time to take another look at FHA loans! It's not just for first time home buyers, but an excellent financing vehicle for move up buyers as well as 2 to 4 unit properties.