House hack without FHA

5 Replies

Good day REI's

I am new to the game and trying to figure out how to finance my first deal.

Buy and hold rental is my preference.

I purchased my primary residence in June of this year with an FHA loan.

I do not have the capital to purchase investment property at 20% down.

Here is my thought. After 1 year in my FHA home. Can I then rent out that home and purchase an owner occupied duplex/triplex, with a better loan? (Less than 20% down), and house hack that property? Is there conventional financing that would do less than 20%, outside of FHA, since I already have an FHA loan? I want to avoid hard money.

All thoughts and opinions appreciated.

Thanks in advance.

@Billy Thurston

Yes, as long as you occupy the house you’re in now for a year, you can then do another owner-occupied loan for the next property and only put 5% down going conventional.

That’s assuming your credit and debt/income ratio allow you to qualify.

@Billy Thurston make sure and check around first. FHA allows 1-4 units without any issue. Many of the other owner-occupied products only do the low down payment if it is a single unit. Call around to a few banks and ask them. If they are too hard to find then you can possibly refinance your FHA to normal, then go buy another on FHA.

@Bryan O.

That thought has also crossed my mind.

I do not have a lot of equity in my primary maybe 10k. Thinking cost of converting that loan would not cover the LTV needed, so would need cash at closing, which in turn chews into the cash needed to buy the multi family.

Billy,

I just did my first deal, an owner occupied duplex in Montpelier with low money down. I did not shop around too much with lenders since the people I dealt with at NEFCU were tremendous and they had competitive rates. I chose a 7/1 ARM over an FHA for a few reasons: (1) PMI was much lower $55/mo vs $165/mo, (2) sidestep the FHA upfront PMI 1.75% premium, and (3) I now still have the FHA option potentially in the future. Anyway the lender offers 5/1 or 7/1 ARM loans for owner-occupied duplex with 5% down, but only FHA loans for 3/4 units; from my (albeit limited) poking around, it seems SFH vs 2 unit vs 3/4 unit loans are treated differently being relatively restrictive in 3/4 unit loans with most lenders.

Good luck and keep rolling, investigating options, etc. If I come across or think of anything will reach out.