Is "Discount" Off Of Appraised Value Or Outstanding Balance?
I hear investors constantly talk about the discount they revcieved or are shooting for, but no one ever specifies if the discount is off of appraised value or outstanding balance: EX: House is worth $200,000 that has a balance of $180,000, FHA. We know FHA discounts 18%, or to 82%, but would this mean I should be able to get this property @ $164,000, or can I get it for $147,600? Any advice appreciated.
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FHA insured loans must consider 2 ratios both involving as-is, FMV. You correctly identified one ratio as (net proceeds must be equal to or greater than) 82% of the property's as-is, FMV. The other ratio is
FMV divided by mortgage balance must be equal to or greater than 63%.
In most cases the "discount" is predicated upon the property's as-is, fair market value.
SSP,
Very helpful. Can you walk through an example of the second ratio - the 63% threshold?
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Gotcha. Will follow up after the holliday.