Investor / Rehabber · Fort smith, AR · Member since 2014 · 178 posts · 30 votes
Can someone please tell me the in's and out's of and FHA loan for an investor.
How many can I buy, how much down, who do I need to talk to, terms, does it have to season before I sell it, is it basically good for people that are landlords? What about flippers?
and any information you can give to me will be greatly appreciated.
Landlord and Real Estate Agent · West Orange, NJ · Member since 2011 · 67 posts · 38 votes
10y
FHA has changed a bit with new regulations. 1. You need 3.5% down. Used to be 3%. 2. There is seasoning, but I can't remember if it's 3 to 5 years, or less without paying penalties. You should talk to a mortgage broker for those terms. 3. You will have to pay PMI (Private Mortgage Insurance) for the life of the loan. It used to be that once you reached 20% equity in your home that you could get rid of the PMI. That is not the case anymore.
So, FHA has it advantages with the low down payment option, but the PMI is con in my opinion. So, I would recommend that if you could do FHA, that you stay in the home for a year and fix it up, then Re Fi out with a conventional mortgage. Again, talk to you mortgage broker to confirm that you won't get hit with any penalties when you Re-Fi.
Investor · Boise, ID · Member since 2011 · 1k+ posts · 736 votes
10y
Hi @Chip Chronister! A great lender in your market is your best resource. Don't just settle on the first one you talk to. An FHA loan is definitely not a vehicle to be used for flipping or landlording. It is intended for those that are going to owner occupy. That said, it can be used for a 2-4 plex that you live in. If you need lender referrals - if you are working with a realtor, she/he should have some. I would ask on BP as well.
FHA has changed a bit with new regulations. 1. You need 3.5% down. Used to be 3%. 2. There is seasoning, but I can't remember if it's 3 to 5 years, or less without paying penalties. You should talk to a mortgage broker for those terms. 3. You will have to pay PMI (Private Mortgage Insurance) for the life of the loan. It used to be that once you reached 20% equity in your home that you could get rid of the PMI. That is not the case anymore.
So, FHA has it advantages with the low down payment option, but the PMI is con in my opinion. So, I would recommend that if you could do FHA, that you stay in the home for a year and fix it up, then Re Fi out with a conventional mortgage. Again, talk to you mortgage broker to confirm that you won't get hit with any penalties when you Re-Fi.
If you put 10% down with FHA, the mortgage insurance will drop off after 11 years. Otherwise it is there for the life of the loan.