Maybe buying Primary home FHA, investing advice

5 Replies

Hi guys,

I'm thinking of buying a house as my primary residence, my plan would be for me to move there and rent my current house. The house is a 3 bedroom, 1 1/2 bathroom, 1700 sq foot, with a 2 car attached garage, $130K. I'm thinking of making it into a 4 bedroom, 2 1/2 bathroom house.  I really like the house, the 4th bedroom would be huge and will have a master bathroom and I actually get to enjoy it! :) I can even entertain the possibility of having roommates and I could live there almost for free!

My issue is that I have no choice but to go FHA, I got quoted and approved (3.75 interest, 5.33 APR, I should have shopped around more!) on this deal so I have to pay the upfront PMI and the monthly PMI, so now I don't want to fall in love with the house I plan to enjoy it but I still want to focus on moving ahead with real estate investing. What advice would you give me on how to use this purchase to advance my real estate investments?

Thank you in advance!

Why do you not have a choice but to go FHA? Conventional 5% down will have lower overall borrowing cost, and 3% down on conventional is an option too.

I'm a loan officer and most of the time for borrowers looking for the least amount of money to get in the door with the lowest monthly payment I propose a single premium mortgage insurance product, and I pay for it through a higher interest rate so there is no monthly PMI or lump sum due from the borrower at closing. I encourage you to ask your loan officer about this option, and if they don't have it or don't know how to structure the deal this way, look for another loan officer.

Hi Peter, because I had a short sale in 2011, I'm an accidental investor thanks to a family loan, got very, very lucky. As I'm sure you know the wait period for short sale increased from 2 to 4 years, I thought I was good to go, got an unpleasant surprise!

should I even consider an ARM loan?

That makes sense Roy.  

An ARM may make sense for you--particularly since FHA requires you to live in the property while the loan is in place. If you plan to keep this property long term but only live in it short term, you should plan to refinance out of the FHA loan when you are eligible to do so.

Since the short sale was 2011, it may be worth waiting until later this year when you are past the four year waiting period.

The refi would be nice if the rates are still low or low enough that it makes sense, otherwise I'm stuck with the PMI.

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