Sarasota, FL · Member since 2017 · 31 posts · 3 votes
Hi everyone, some basic questions as I try and learn some of the basics. I read or possibly heard on a PodCast that if you can do a FHA with minimum down you can then then have more money to use on additional investment properties. What I get caught up if you put the minimum down on FHA and have the extra cost of Mortgage Insurance is it worth it? I"m guessing the extra investment properties would out way the cost. Is this accurate? After the required one year as you move on to another and repeat I'm guessing then you would need to refinance. Any guidance here to help me paint this picture would be so much appreciated. haha so much to learn and thankful to everyone here.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
9y
I've done the math in the past, and generally it plays out such that going FHA is mathematically identical to having a normal 30YF at 80% LTV, and a hard money 2nd position loan at an interest rate north of 10% for 16.5% LTV (CLTV 96.5%, which most FHA loans are). That makes it sound bad.
However...
If I told a bunch of seasoned real estate investors I had some sexy new combo mortgage product pairing that would let them pair a 75% or 80% LTV normal 30YF first with a 20% or 15% LTV second at 15% interest rate to let them buy multifamily investment properties for 5% down, I would very quickly be unable to keep up with demand.
So, overall, FHA looks bad when you are first starting out and have limited context. People that only get 1 or 3 mortgages in their entire lives love to talk trash about mortgage insurance. But people who get one or two mortgages per year often have a very different take on it and will gladly pay for an insurance policy if it means they can keep tens of thousands of dollars in capital in their pockets for deployment elsewhere.