Choosing a strategy - should I start with house hacking?

Question

I'm very luck to be in the situation I'm in - but the more options the more analysis paralysis. My husband and I make a good living, both work remotely, and currently live with my in laws (new baby!). Therefore, we don't have an existing house, and are open to living or investing anywhere with no real limitations on timing. I'm currently determining which market, and what strategy. After my initial research, I think my first investment should be a house hack because I can take advantage of an FHA loan, whereas if I purchase another property to flip or hold, I would no longer be eligible for an FHA loan (even if I don't use the FHA loan to buy this property). Is this accurate?

Related Questions

• Would I lose my option to have an FHA loan if I purchase a rental property first? I think so...
• If you don't use an FHA loan to buy a rental property (and instead use BRRR method or other), can you still qualify for an FHA loan later for a house you plan to live in?
• We may not live in the multi-unit and continue to live with our free babysitters (I mean, in laws!) - can we just keep the unit empty and still be legal under FHA guidelines?

Thank you!

Firoozeh Mofakhami · Answer

@Jonathan Schwartz Would love to connect - we sound like we have similar situations.

@Ann North Thank you for that that - PMI is a lot!

@Joe Scaparra Wonderful!! Thank you - this is very helpful, but back to having too many options ;)

Ali Boone · Answer

Oh cool, never heard of it. Even if you can avoid PMI, just make sure the numbers work out. With that big of a loan, the payments could outdo the income. But if it doesn't, that can be infinite returns! :)

Firoozeh Mofakhami · Answer

@Ali Boone haha - thank you! Your advice is greatly appreciated! My thinking was to put down as little as possible - hence the FHA...but I could likely put down 20%. We are also looking in a physician's loan whereby we can put down little to nothing with no PMI. But I'm worried we might have missed the window on this.

Ali Boone · Answer

Is there any reason you're so focused on FHA? Is it because you don't have enough to put down for a 20% down payment?

FHA sounds great in theory, but ultimately the expenses on it are atrocious, and usually deal-killing. Not only do you have the PMI, but you have a ton of added general mortgage interest because of how big the loan is. The payments get big- fast. I've not really known of a property to cash flow with an FHA on it.

As far as house-hacking, here are some things to think about-

https://www.biggerpockets.com/blog/considerations-...

Virginia can be tough for cash flow in general, too.

(have I sufficiently buzzkilled your ideas? Lol. Didn't mean to!)

Joe Scaparra · Answer

@Firoozeh Mofakhami , Related Questions

• Would I lose my option to have an FHA loan if I purchase a rental property first? I think so...
• If you don't use an FHA loan to buy a rental property (and instead use BRRR method or other), can you still qualify for an FHA loan later for a house you plan to live in?
• We may not live in the multi-unit and continue to live with our free babysitters (I mean, in laws!) - can we just keep the unit empty and still be legal under FHA guidelines?

No you won't lose your option on an FHA loan if you buy or own a rental property first.

Yes

Questionable, By the spirit of the FHA loan, the answer is No.  An FHA should be your PRIMARY RESIDENCE (Owner Occupied).

Have you considered investing in a duplex, live on one side and you could qualify for an FHA loan.  After you have 20% equity built up you could refi into a conventional loan and then find another duplex and move in it using an FHA loan again.  You just can't have two FHA loans on the books at the same time unless you have some extraordinary qualifying exception.  From your description of your situation, you don't.

Ann North · Answer

One thing to keep in mind with FHA is the PMI/MIP it is a LOT monthly and can make the difference on cash flow  vs. neg cash flow.

Jon Schwartz · Answer

@Firoozeh Mofakhami, I don’t have much to offer by way of FHA advice, but congrats on house hacking with a baby! I’m doing the same thing right now. I got so jealous of podcast interviewees talking about house-hacking just after college that I decided to just do it now. I’m 37, married, and have a 2-year-old daughter — and we’re in escrow on a duplex in a beautiful neighborhood here in LA. I can’t wait to let you know how it all goes!