My house dilemma seeking guidance if possible

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My house dilemma seeking guidance if possible

James Woods
Member since 2018 · 6 posts · 2 votes

so I bought a house with fha about three years ago and lived in it for a year. I moved out of the property and rented it out and it is still rented out currently with positive cash flow( don’t want sell). The issue I am having is I am looking to get another primary residence, but most of the research I have ran into says I can’t get another fha and I’ll have to go conventional with at minimum 10 percent down or more. Can anyone shed some light on the issue? Even if I go conventional, is there a way to get away with 5 percent down or less? I have a decent credit score at 730 if that helps with evaluating the situation and live in the Chicago land area. Any information on the matter would be greatly appreciated 

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Zack KarpPro Member
Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
5y

I think the first question here is that we don't know if we are talking about a 1-unit property, or a 2-4 unit property.

@James Woods here are your options:

1. You can buy another primary residence 1-unit property with Conventional financing with 5% down.  (3% down is either for 1st time homebuyers, or if you can qualify for Home Possible or HomeReady, which both have an income cap that may be unlikely to meet carrying 2 properties, but something to look into.)

2. You can buy another primary residence 2-unit property with 15% down.

3. You can buy another primary residence 3-4 unit with 20% down.

4. You can refinance your existing property out of FHA into Conventional, and free up your FHA eligibility to buy another primary residence 1-4 unit with 3.5% down. In order to do this, since this property is now an investment property, if your existing property is a 1-unit, the max LTV is 85%, and if it's a 2-4 unit, the max LTV is 75%.

Hope that helps.  Best of luck!

847-387-5513
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  • Trevor Davis
    Denver, CO · Member since 2016 · 15 posts · 13 votes
    5y

    I'm almost positive you can do 5% down when acquiring a second property.  That's what I'm planning to do, so hopefully I'm right about that.  You'd have to pay mortgage insurance, but that's not too bad at the current rate.  Hopefully a lender will chime in.

    1Reply
  • James Woods
    OP
    Member since 2018 · 6 posts · 2 votes
    5y

    @Trevor Davis man I hope you’re right lol. I’m like 10 percent plus down? Geez. 

    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    5y

    @James Woods if you are doing a single family home then you can almost certainly go with a lower down payment. I have even seen as low as a 3% down conventional that one of my clients did here locally in Westchester. I personally purchased my home here in Riverside with a 5% down conventional a few years back as the terms are quite a bit better than FHA (no PMI).

    You should connect with @Joshua Jones. He has been my lender since I got started, and he is an amazing resource since he has invested in real estate himself. 

    2Reply
  • James Woods
    OP
    Member since 2018 · 6 posts · 2 votes
    5y

    @John Warren appreciate your in put.

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    5y

    @James Woods - A couple of ideas that I think might help.

    1. Refinance out of the FHA loan so you can do FHA again

    2. Do a HELOC and use that money at the higher down payment

    3. Do a 5% down conventional loan as @John Warren suggested

    Definitely reach out to an investor-friendly lender like @Zack Karp or @Michael Facchini, they can definitely help you navigate the situation and figure out the best solution.

    [email protected]
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    2Reply
  • Michael Facchini
    Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
    5y

    @james woods, 5% down Conventional is still an option, assuming your income/debt ratios suffice. FHA isn't necessarily ruled out either, buy as mentioned above if you refinance out of FHA into Conventional that certainly makes it easier to use again. If that's of interest, you'd of course want to see how the interest rate would increase or decrease via that refi, but also need to factor in whether the mtg insurance would drop a bit from FHA's typically more expensive insurance to Conv's typically less expensive insurance.

    2Reply
  • Zack KarpPro Member
    Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
    5y

    I think the first question here is that we don't know if we are talking about a 1-unit property, or a 2-4 unit property.

    @James Woods here are your options:

    1. You can buy another primary residence 1-unit property with Conventional financing with 5% down.  (3% down is either for 1st time homebuyers, or if you can qualify for Home Possible or HomeReady, which both have an income cap that may be unlikely to meet carrying 2 properties, but something to look into.)

    2. You can buy another primary residence 2-unit property with 15% down.

    3. You can buy another primary residence 3-4 unit with 20% down.

    4. You can refinance your existing property out of FHA into Conventional, and free up your FHA eligibility to buy another primary residence 1-4 unit with 3.5% down. In order to do this, since this property is now an investment property, if your existing property is a 1-unit, the max LTV is 85%, and if it's a 2-4 unit, the max LTV is 75%.

    Hope that helps.  Best of luck!

    847-387-5513
    3Reply
  • Derrick Dill
    Investor · Hawaiian Gardens, CA · Member since 2015 · 308 posts · 386 votes
    5y

    Like others have suggested, refinance out of your FHA into conventional (added bonus if you can get rid of PMI). This will free up another FHA.

    There are exceptions that let you have another FHA. I bought with FHA loan in southern California in 2016, moved up to bay area for work in 2019 and bought with another FHA. I have 2 FHA loans open right now. If you move closer to work, you can use FHA again. I literally just did it a few months ago. Lender has write a letter explaining that you moved from your previous primary for work and you're closer now

    2Reply
  • Joshua JonesPro Member
    Member since 2020 · 70 posts · 32 votes
    5y

    @James Woods, feel free to reach out to me. There is some correct info in these responses and some incorrect replies. There are options though. In general you CANNOT have two FHA's. Only unless you are relocating greater than 100 miles from your other FHA. It's tough to do.

    FHA took out the language allowing two FHA's for family circumstances or "moving up."

    2Reply
  • Brad Sneckner
    Lender · Riverside, CA · Member since 2014 · 75 posts · 60 votes
    5y

    @James Woods I concur with @Joshua Jones. There's some great information in the posts above, and for the most part they are spot on. Zach's reply is a great overview of your options, depending on the details of what you're trying to purchase next. I'm a local lender in SoCal so if you want to reach out about more specifics feel free to do so. 

    Good luck!

    0Reply
  • Kyle D Birch
    Rental Property Investor · Chicago, IL · Member since 2019 · 77 posts · 36 votes
    5y


    Originally posted by @John Warren:

    @James Woods if you are doing a single family home then you can almost certainly go with a lower down payment. I have even seen as low as a 3% down conventional that one of my clients did here locally in Westchester. I personally purchased my home here in Riverside with a 5% down conventional a few years back as the terms are quite a bit better than FHA (no PMI).

    You should connect with @Joshua Jones. He has been my lender since I got started, and he is an amazing resource since he has invested in real estate himself. 

    Follow John’s directions. He connected me with Josh and I have never looked back. 3 mortgages and 2 refinances later and he’s better than any of the other 5 lenders I have used over the years. 

    1Reply
  • Joshua JonesPro Member
    Member since 2020 · 70 posts · 32 votes
    5y

    Appreciate it @Kyle D Birch. @James Woods if you want to have a conversation just let me know.

    0Reply
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