Hey BP, I'm relatively new to the community. I picked up real estate when I was 20, did a house hack (didn't know that's what it was called at the time) and flipped it under a year to move out to the West Coast. Now (7 years later), I've recently got interested in doing another house hack in ME again to start my RE journey since my job allows me to telework for the time being.
I plan on trying to buy a MF(2-4 units) under $300,000. I am curious what others think about the pros and cons of a FHA loan vs conventional loan besides the 3.5% down vs 5-10% down. I was pretty immature when I picked up my first real estate but I do recall having to paint a fence in a snow storm during closing for my FHA loan. I'm leaning more towards conventional due to the flexibility in the loan, still shopping though. Any information would be greatly appreciated!
My biggest concern is if I do the house hack and get locked in for 12 months but my job needs to pull me back to work in San Diego, what happens? I am trying to play it safe and do not want to break contract. Another concern is if I purchase a MF that has full tenants, what happens if I have the seller serve 60 day notice or I serve it and they do not leave, I would still need to move in within 60 days correct? I'm pretty sure most FHA loans require one open unit but a conventional may not.
Conventional loan is considered stronger than FHA. If a property has been on market for awhile, FHA has a good shot. But it really depends on seller and market, often FHA works for new properties as well.
If you house hack, it is owner occupied loan so you need to live in a unit within 60 days (confirm with lender). Part of your offer can be to have 1 unit vacated upon closing so you can move into it. Or if it's month to month you can remove tenant. Best bet would be for seller to do it before closing in case there's trouble getting a tenant out.
I would check with your employer if long term remote work is allowed. There are tax implications for businesses with workers working out of state, so if they find you change your address to Maine they may not allow.
Curious where in Maine are you looking?
Thank you. I didn't think about the task implications, I'll look into it.
I am looking around Southern Maine (anything south of Augusta). I grew up around there so the area is very familiar and I have friends/family. To be a bit more specific, Westbrooke/Lewiston/Auburn/Portland/Biddeford/Saco/Sanford. I would also consider Bangor, outside my scope, if the deal was good enough.
@Cody Maheu as Andrew mentioned, making offers with a conventional loan will make your offer more competitive when competing with other offers. That would be the biggest benefit to using that type of loan. The strictness of the FHA appraisal can be hit or miss depending on the appraiser. If you can do conventional, do it. If not, it's not the end of the world. Work with what you got and search for properties that others may not be interested in for whatever reason - location, existing tenants, etc... Also, this is somewhat determined by your max price of $300k, but staying out of towns like Portland, Westbrook, Biddo/Saco will help you be more competitive as well.
@Cody Maheu I agree with the above, conventional is better. With less than 20% down, you will have a permanently higher rate with FHA, vs conventional, PMI phases out and eventually goes away. If you're planning to buy and hold, this works best for the long term. As far as being worried about the mortgage if you get pulled somewhere else, this has happened to me before and it's no big deal. As long as you had an honest intent to live there for the minimum time period and are making your payments on time, there will never be attention drawn to the situation. You are required to be able to move into the property though with either one.
I’m also looking in the same areas you are. If you want to send me your specifics I can send you anything I see that could be a good fit.
What did you mean by saying "staying out of towns like Portland, Westbrook, Biddo/Saco will help you be more competitive as well"? The market has seemed a bit crazy. All five places I tried to set up a viewing for a friend to see got put into contract within the same week. Is there a reason why most of the places in Sanford have been pretty static? I see there are decent properties but have been sitting on MLS for a relatively long time to it's neighbor Biddo.
Thank you. That's a relief about being pulled away, I didn't want that condition to prohibit me from dipping my toes in again.
As for my specifics, my search has a decent range. I'm more looking for something that has an intuitive feel good move. This could range from picking up a nice duplex in a quiet neighborhood to a quad in a lower income area. My goals align with owning multiple small MF's within 5 years. The numbers just have to match up!
I'll reciprocate the offer if you'd like! I tend to just check MLS every morning, not really sure where else to look.
What are the numbers you are looking for, and are you looking for any set distance from any particular place? I'm trying to stay within an hour from Durham, ideally I would like to flip or BRRR but ok with B&H with a COC ROI of at least 35%/yr.