Hey Everybody! New To BP! Quick Question About FHA Loans

Buying & Selling Real Estate
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Hey Everybody! New To BP! Quick Question About FHA Loans

Matthew Zelezniak
Member since 2021 · 4 posts · 0 votes

I have read a couple books including The House Hacking Strategy and I’m still a little confused as to how you would go from your first house hack to your second after living in the first one for a year. Do you need to refinance? Bank on your current day job income and current cash flow from tenants to prove you can support two loans? Take out a home equity loan?

Any help would be gratefully appreciated, Thank you!


Matthew 

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Griffin SchermerPro Member
Investor · Bloomington, IN · Member since 2019 · 76 posts · 55 votes
5y

You just need to have the conversation with your lender about doing that next deal. If they can't help than you may seek other lenders or sources of financing. In theory, moving out of your house hack you'll have more income coming in from that property than you did when you were living in it. Whether you're filling another room or an entire unit, you should see positive cashflow. If you won't show positive cashflow when you move out you might need to find a partner(s) for your next deal. If you live in an area showing appreciation you may be able to refinance and pull some money out for your next deal, or you could find OPM. Good luck!

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  • Kyle Davidson
    Conshohocken, PA · Member since 2020 · 16 posts · 10 votes
    5y

    Hi Matt,

    I am currently searching for my second House Hack and just went through the loan process. I do not know if the loan requirements and restrictions vary state to state. I worked with my lender to get pre approved for my next loan.

    I would recommend connecting with a good lender and working through your different options.

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  • Aaron ZimmermanBusiness Member
    Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
    5y

    I can't say for certain as I haven't done this. However, one big consideration would be not showing a massive loss on your house hack for Schedule E (on the tax side). 

    As far as the practical side, you may have to look into various loan programs. If you do FHA first, I'm sure there are loan products available that don't require 20% down.

    The other option would be to do a value-add with the FHA using a 203(k) loan and then refinancing. Still keep the tax side in mind though as lenders do look at that, especially when factoring in DTI.

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  • Griffin SchermerPro Member
    Investor · Bloomington, IN · Member since 2019 · 76 posts · 55 votes
    5y

    You just need to have the conversation with your lender about doing that next deal. If they can't help than you may seek other lenders or sources of financing. In theory, moving out of your house hack you'll have more income coming in from that property than you did when you were living in it. Whether you're filling another room or an entire unit, you should see positive cashflow. If you won't show positive cashflow when you move out you might need to find a partner(s) for your next deal. If you live in an area showing appreciation you may be able to refinance and pull some money out for your next deal, or you could find OPM. Good luck!

    1Reply
  • Matthew Zelezniak
    OP
    Member since 2021 · 4 posts · 0 votes
    5y

    Thank you guys, all helpful information!

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  • Brandon Park
    Lender · Atlanta, GA · Member since 2015 · 1 post · 0 votes
    5y

    @Matthew Zelezniak you'll have a challenge obtaining a 2nd FHA loan as the guidelines are pretty strict. You'd want to refi to conventional first or if you buy a single family opposed to multi you can do 5% down Conventional on the new one. Multi family requires a higher down payment for conventional financing

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  • Matthew Zelezniak
    OP
    Member since 2021 · 4 posts · 0 votes
    5y

    @Brandon Park to clarify you are saying to refinance my first house hack into conventional then apply for FHA for a single family on my second house hack?

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  • Nick C.
    Denver, CO · Member since 2017 · 12 posts · 4 votes
    5y

    Hey Matthew! Welcome!

    Yes, house hacking is banking on your job income plus your roommate income to satisfy the qualifications for the second loan.

    There are several restrictions on using a FHA on a second house, here's two of the clauses that come to mind. The hundred mile rule, you can buy a vacation property with an fha but it must be 100 miles away from your other fha. Also FHA has a clause that states something to the extent of "cannot be used to build an investment portfolio".

    Home equity loan, to buy the second property? I don't think this would work with the numbers, assuming you put 3.5% down on the first place you're at a 96.5% LTV, so there isn't really any equity to be drawn on.

    As was said earlier you can refinance your first to a conventional then use an fha again.

    These are really lender questions though, call a lender and they can walk you through all this after looking at your finances and knowing your particular financial situation.

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  • Matthew Zelezniak
    OP
    Member since 2021 · 4 posts · 0 votes
    5y

    @Nick C. So if I refinanced into a conventional loan and then did a house hack and proceeded to do that, would it not be considered building my portfolio?

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