FHA Loan Suggestions?

Question

Thinking about doing a FHA Loan for a property and rent the rooms for cash flow and live rent free

David Martin · Answer

Yeah, no problem. USDA isn't as widely talked about, even though it is a nationally available program, but for some areas I think it works well. Southern Louisiana is just one of those places where I think it works. You also have things there that nobody else would ever think of going after, like the LA Department of Administration has leases for campsites down in the Basin that you could essentially follow the vacation rental model to lease to duck hunters over the winter months, and to the fisherman in the spring and summer.

David Martin · Answer

@Xavian Rimmer Would recommend doing some research on the USDA options (USDA website). Short of the NOLA metro area, a massive portion of LA is considered rural enough to be eligible under that program, and has a few extra features that the FHA loans don't, most significantly is 100% finance option (zero down payment), but also can support new builds, such as you picking some land, dropping in septic and well, and then building a new home (or placing a permanently attached mobile), additionally, while there is a PMI requirement, the rate for the PMI is lower than FHA's requirements.

Also, check out LHC below, as they may additionally throw in some dollars towards your purchase, regardless of if you use FHA, USDA or Conventional, so you might be able to get them to cover a good chunk or all of your closing costs. So, if you qualify under the guidelines for all of these, you could conceivably get a no-down payment USDA loan, and have LHC cover your closing costs fully... so you know... basically a free starter house. It would just be up to you to make sure the numbers work for cashflow to ensure your costs are all covered.

https://www.lhc.la.gov/down-payment-assistance-homebuyers

Mary K. · Answer

@Xavian Rimmer FHA is a government backed loan so you won't find much change from bank to bank. I like local, mortgage banks because they are faster and can work with you on any issues like bad credit etc. Big banks are more strict. Just goggle "mortgage bank near me" and start calling.

One thing to note, at this moment in time PMI stays on for the life of the loan. Something to consider when you run the numbers.

Hope that helps :)

Chace Fraser · Answer

@Xavian Rimmer house hacking a single-family home and renting out the rooms is a great way to drive down your cost of living. A bonus to house hacking a single-family vs a multi-family is a lot of times there will be programs that can help you fund the downpayment. For instance, in my market there are products and offerings that allow the borrower to get enough funding to cover the downpayment and closing costs.

@Elise Marquette I know that borrowers can count 75 percent of the projected gross rental income towards their monthly income on multi-family properties. I know there was a new program rolled out here that allows them to potentially count 30 percent of potential rental income if they're renting out rooms. However, I believe they need to have prior landlord experience. Can you elaborate a little more so I can understand better?

Brooks Johnson · Answer

Hey, I think you have the right idea, that's almost exactly how I started out back in 09.  My recent experience (as an agent) has been that life will be easier for you if you can get approved "conventional".  There are a lot of good 3-5% down programs or even less with down payment assistance.  Most of my buyers when they price it out conventional is a better deal for them in the long run, and easier condition requirements.  If FHA was your only option I'd still go for it.  Find a good agent, I'd get coffee with a few, and then get the mortgage process rolling.  Good luck to you on your journey!!

Elise Marquette · Answer

It's a great idea. Additionally, FHA will allow you to use the projected income to help qualify. If you can find a property, definitely go for it! FHA is a fantastic program and helps a lot of investors get their start. You can also always just refinance into a conventional loan to get rid of the mortgage insurance once you get to 80% LTV. Your rate will likely increase once you go into a conventional loan, but dropping the mortgage insurance usually makes up for it.

David Martin · Answer

I mean, there are plenty of houses with access to the waterways there. Targeting houses in areas closer to boat ramps and the WMA access points would make sense. Houses with enough space to park a boat... larger patios with basic outdoor kitchens to clean and cook the days catch.

Daniel Purcell · Answer

@David Martin

You are a genius...any ideas how to rent out anything to the fisherman/outdoorsman other than camp sites?

David Martin · Answer

@Xavian Rimmer In the process of finding that LHC link for you, I also came across this, which would give you just a quick overview of the possibilities.

https://www.nerdwallet.com/blog/mortgages/louisiana-first-time-home-buyer-programs/

Xavian Rimmer · Answer

@David Martin Wow thank you so much 👍🏽 I appreciate this

FHA Loan Suggestions?

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