FHA loan limits vary by county and state where you want to buy. It is well understood that home prices vary throughout the country. What $100,000 will buy in Miami won’t buy you a hut in San Francisco. You should check to be certain the home you want to buy fits into the FHA loan parameters if you will be using FHA for financing. See the chart below for 2010 limits in New Jersey counties.
FHA Loan Limits in New Jersey Counties
Single Family 2-Family 3-Family 4-Family
Atlantic $453,750 $580,850 $702,150 $872,600
Bergen $729,750 $934,200 $1,129,250 $1,403,400
Burlington $420,000 $537,650 $649,900 $807,700
Camden $420,000 $537,650 $649,900 $807,700
Cape May $487,500 $624,100 $754,350 $937,500
Cumberland $405,000 $518,450 $626,700 $778,850
Essex $729,750 $934,200 $1,129,250 $1,403,400
Gloucester $420,000 $537,650 $649,900 $807,700
Hudson $729,750 $934,200 $1,129,250 $1,403,400
Hunterdon $729,750 $934,200 $1,129,250 $1,403,400
Mercer $440,000 $563,250 $680,850 $846,150
Middlesex $729,750 $934,200 $1,129,250 $1,403,400
Monmouth $729,750 $934,200 $1,129,250 $1,403,400
Morris $729,750 $934,200 $1,129,250 $1,403,400
Ocean $729,750 $934,200 $1,129,250 $1,403,400
Passaic $729,750 $934,200 $1,129,250 $1,403,400
Salem $420,000 $537,650 $649,900 $807,700
Somerset $729,750 $934,200 $1,129,250 $1,403,400
Sussex $729,750 $934,200 $1,129,250 $1,403,400
Union $729,750 $934,200 $1,129,250 $1,403,400
Warren $402,500 $515,250 $622,850 $774,050
Keep in mind these are maximum “loan” amounts, not maximum purchase price. FHA does not set limits on the purchase price. Conceivably, you could buy a home with a purchase price of $2,000,000 if your down payment was high enough to reduce the loan amount to county maximums.
As you can see in the table, FHA permits buyers to purchase 2, 3 or 4-family properties. So long as the buyer will occupy one of the units, FHA is okay with the other units being rentals. This is an excellent investment opportunity that most home buyers know nothing about. And now is a great time to find a deal on an income-producing property.
Contact me for any information about qualifying for an FHA loan in New Jersey.
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{ 2 comments… read them below or add one }
If I want to buy a house with 4 apts but right now there is nobody renting and no income is ther from rents, how can I buy it without showing I can pay the entire mortgage? Am I allowed to find renters before I buy and move in?
@Jerry Gold – There are additional requirements when buying a 3 unit or 4 unit home. If you want to put down the minimum of 3.5%, we must do a separate calculation. FHA requires that 85% of the current gross market rents (determined by the property appraiser) for all the units must be equal to or greater than the mortgage + property taxes + insurance (PITI). If rents are less than PITI, then you will have to increase your down payment until that calculation is equal to or greater than. You must also have at least three months of PITI in cash reserves (money in a bank account or fairly accessible somewhere) after your close your loan.
For example, say you want to buy a 4-unit property for $500,000 and the market rent for each unit is $1,500. The total gross rental income would be $6,000. We then multiply $6,000 X 85% to get $5,100/mo. If the PITI with 3.5% down on a $500,000 four unit property with an FHA loan is $3,700, then this scenario would work out. But if the PITI would be $5,500, then you would have to increase the down payment until we get the PITI down to $5,100 or less.
To your question about finding tenants, you are free to seek out tenants via word-of-mouth, etc. But it might be difficult to show the property and you would not be able to sign a contract until you close the loan. You can’t rent a property you don’t own. But this is why FHA requires you to have the reserves. You might need those funds to pay the loan until the property is fully occupied.
FHA is a great way to buy a property like this because you essentially get a primary residence/investment property with the virtual ease of buying a regular single family home. There is no other way to buy a 4- unit property with a 3.5% down payment. AND you get mortgage rates equivalent to the rates for a primary single-family – NOT rates for an investment property.
Give me a ring for any other questions or if you need a realtor to locate a great buy.