FHA financing or not?

Question

Hello, I am moving to Atlanta,GA and I will be purchasing my first investment property. I have about $25k cash....... Im trying to see if I should use FHA financing with 3.5% down or pay the full 20% down payment to avoid the PMI. Example: lest say hypothetically I find a property for 100K and use $20,000 for a down payment. that would leave me with only $5,000 left..... or I use 3.5% down ($3,500) and pay PMI for the life of the loan BUT  still have $21,500 to do as I please or invest in more property

Peter M. · Answer

Go FHA, better yet do 203k then refinance out of it in a few years. Use the extra money for another property or as reserves until you build up enough for the next property.

Account Closed · Answer

It comes down to the math. But, the best would be to use the FHA loan so you can make the 25K go further. You can always refinance out of the FHA later.

Michael Pearse · Answer

@Darrell Carter I recommend using leverage to your advantage. Finding a duplex to live in and rent the other side will put you years ahead. In this situation I would use the FHA, put 3.5% down and using the remaining money to either rehab the other side (to raise rent) or get another property. You are on the right path

Michael Pearse · Answer

@Darrell Carter In this situation, it depends. If you purchase a single family home and rent out the rooms/other units (duplex, triplex, ect), then you can use FHA financing. FHA financing will only apply if you plan to live in the property. If you invest in a home and do not live in it, banks typically require 20%-25% down.

David Hammill · Answer

Account Closed

Darrell Carter · Answer

yes, Actually I will be purchasing a Duplex , i should have put that in the post........ So does it make more sense to avoid the PMI or take the PMI and use the leftover money to invest in more property. I would Love you guys opinion on that

Stephanie P. · Answer

You CAN buy a duplex or fourplex with 3.5% down using FHA, but you must live in one of the units.

Eric Neith · Answer

Peter, In regards to going FHA first and then his extra money for another property... What would be your next step for that second property?

FHA financing or not?

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