What are the odds of getting an FHA loan?

[Craig Garrow]

I'm eyeballing a triplex here in town, and looking to get some bank financing. My issue is that I just purchased a duplex with a 5% down "owner occupied" conventional loan and closed in January. This triplex is in an "A" neighborhood and could be a home run for me if I'm able to get it. I could do a 20% down conventional loan if I utilized Seller's Concessions, but it would be tight. My next thought would be to attempt getting an FHA loan for 3.5% down, but I was told it may be difficult to get this because I already own a property that I bought conventional. Any input is greatly appreciated!

[Chris Mason]

Technically, there is no explicit rule prohibiting you from getting an owner occupied FHA loan right now. However this will fail the cursory "BS Test" for owner occupancy the second the underwriter gets wind of it. You look a little like someone that just goes around buying investment properties using primary residence financing (not saying you are doing this, but that's how it'll look), which is fraud.

What changed, that you couldn't foresee, that justifies buying another property as owner occupied 3 months later? "It's a great deal!" will not suffice. Mom got brain cancer and I need to be close to her, a job relocation, my kid got injured and is now permanently in a wheelchair and the old house isn't wheelchair friendly, old house burned down, etc, are what we're looking for.

The other alternative, depending on how much it'll cost you, etc, would be to refinance the duplex into investment property financing with a closing concurrent to the FHA purchase closing. You'd use the same lender for both or it will not work. There's always some rule that gets in the way (or makes it downright impossible) when it's been less than six months since your last mortgage on a given property and you want to refi; in this case it'll be that the lender on the refi will use the lesser of purchase price or appraised value, effectively meaning equity gains through home improvement will be disregarded. The question here would be: Will an "after-the-fact down payment" (what we call coming in with cash on a refi) on the old house to get the LTV down to 75% cost more or less than making a full down payment on the new house?

@Jerry Padilla do you do business in NY and do concurrent closings and/or have any other thoughts on this?