Buyer qualifies for 80% - lender won't allow 2nd?

Financing, Hard Money Lenders, Private Money
1

I have a couple who is REALLY interested in purchasing one of my properties. Long story short, the wife has terrible credit due to a divorce a while back, so they only used the husband for credit. Unfortunately, that only allowed them to qualify for $125,000. My property is listed for $143,000. I told them I would be willing to take back a 2nd. The husband called me last night and said his mortgage broker told him that FHA won’t allow a 2nd. I told him that was news to me, but I’m not skilled in FHA guidelines. The wife called me this am and left a VM saying her broker misunderstood and thought they were trying to get financed for the whole $143,000 (or something like that), and - according to her message - “he knows it can be done, but he’s not sure how.” Huh??? I’m about ready to tell the woman to use a broker I used locally for this transaction as this is just getting wierd. Anyone heard of FHA blocking a 2nd? Any other advice you can give me here would be helpful, too.

2

Broker does not know what he is talking about. FHA does allow seconds. The probelm may be that the borrower does not meet FHA debt ratio quidelines. A second is not going to fix that. They may want to look at the Fannie Mae My Community product. It can allow Debt ratios up to 65%

Chapter and Verse:
C. Other Organizations and Private Individuals. Other organizations and private individuals may provide secondary financing under the following conditions:

  1. The combined amount of the first and second mortgages do not exceed the applicable LTV ratio and the maximum mortgage limit for the area.

  2. The repayment terms of the second mortgage must not provide for a balloon payment before ten years (or other such term acceptable to FHA), unless the property is sold or refinanced, and must permit prepayment by the borrower, without penalty, after giving the lender 30 days advance notice.

  3. The required monthly payment under both the insured mortgage and the second mortgage or lien, plus other housing expenses and all recurring charges, cannot exceed the borrower’s reasonable ability to pay. Any periodic payments due on the second mortgage are due monthly and are essentially the same in dollar amount.