Different Kinds of Loans

1 Reply

Hey BP community,

I know that the 203K FHA loan has been recommended several times for those that are just starting out with their first home (and possibly for those that are still in college and don't have the employment track record that they look for when qualifying) but I just wanted to know if there were any other loans out there that are comparable to this loan and what the differences would be. This would be assuming that the individual planned on purchasing a small Multi-family to house hack. What are the pros and cons of the 203k FHA loans (and any other comps.)?

Thanks!

The 203k is great if the property truly needs work, but it comes with some headaches as well. If a property does not need a lot of work, but just minor things you can use more conventional loans to get started. When using 203k there are more steps involved and higher costs in the interest and closing/due diligence costs. Plus you will have to lock down a contractor who is licensed, insured, etc which can be the biggest headache of all. My favorite loans for a first property are HomeReady and HomePossible. For multis the HomePossible loan is the better of the two. The down payment will be slightly higher than FHA at 5%, but it means that you have the FHA loan open to use for later properties. Plus the loan can be built out with no PMI and usually a lower monthly cost than a comparable FHA loan.