FHA Strategy

4 Replies

Hi friends,
I have a quick question for the portfolio builders. I'm in the market for a new house to occupy, already owning and renting one out of state. The mortgage companies balk at the idea of my rental because I bought it a year and a half ago, so they've approved me for an FHA loan, and will not consider a conventional loan.

My wife and I are planning on our next purchase being a long term rental, after we save money for another down payment anywhere from six months to a year down the road.

I know that FHA rules kill cash flow on rentals. What is another possible strategy that utilizes an FHA loan, that makes money in real estate - if it's not buy and hold? What are some other ways I can play the cards I've been dealt?

Hello Josh,

Why won't they consider you for a conventional loan? You only have two mortgages right?Now so unless your DTI is too high you shouldn't have an issue with qualifying for another one.

Can you give more details because it sounds like you should be ok. 

I currently have 1 mortgage, am looking for a second. For some reason I've been told that Fanny and Freddie won't include my rental income to my DTI, either because I don't hold a 20% equity position in the first mortgage, or because I don't have a full 2 year rental history in it yet.

Did you include your investment property on your schedule E and if you did did you claim a loss?

If so that could be the problem but if you didn't claim a loss it doesn't matter that you have less than 2 years.  Fannie doesn't require rental history but freddie does require two years.

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