1st home conventional out of state, 2nd home FHA?

4 Replies

Hi all, 

I'm not sure where to find up-to-date info on this specific situation so I figured I'd ask.

We would like to buy rental property in Ohio with a conventional loan @ 20% down. We don't own a home yet in California (where we live), but would like to buy something for ourselves in the next 1-2 years hopefully. Would an out of state conventional-loan home purchase DISQUALIFY us from purchasing our first owner-occupied SFR for ourselves with an FHA loan (probably around 10% down) when the time comes? Am I shooting myself in the foot?

Any help or insight is appreciated!


Hey Gordon,

To be considered a first-time homebuyer, you cannot have any ownership interest (sole or joint) in a residential property for 3 years prior to purchasing the subject property. Only one borrower on the loan has to meet this requirement to be considered a first-time homebuyer.

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Yes, she would still count as a first-time homebuyer. However, the lender will typically qualify your loan based on the lesser of the two credit scores (between you and your wife)--so if she has bad credit, it could hurt your chances of getting the loan. 

Also, I see you mentioned you have 10% to put down; First-time homebuyers on conventional loans are eligible to put 5% down and sometimes as low as 3% down (if your income is less than or equal to 80% of the area's median income).

No, you will not be disqualified from purchasing a home on an FHA loan if you own a rental property on a conventional loan. You do not have to be a first time homebuyer to use an FHA loan. It's a very common misconception but you can have other properties and still buy a primary residence FHA. The minimum down payment for an FHA loan is 3.5% for 1-4 units.

You will not qualify for any first homebuyer programs but honestly, you are much better off not using a FTHB program. They tend to come with lower interest rates and you have less equity in the property. Many also require you to keep the mortgage on the property for 1-5 years or you have to pay back the amount of assistance you received. Additionally, many FTHB programs are stringent with how much income your household is allowed to generate in order to qualify.