Getting an FHA with Relative (Out of State Investing)

Multi-Family and Apartment Investing
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Getting an FHA with Relative (Out of State Investing)

Travis Newton
Member since 2018 · 1 post · 2 votes

Quick question regarding the FHA loan.

In my area of Arlington/Grand Prairie, TX there aren't a ton of multifamily properties. We're working with a great RE agent who did warn us that it'll probably be an uphill climb to find a decent duplex or quad in our area. 

With that being said, I have a close relative that lives in Oklahoma City where there are a ton of duplexes, new, old, and everything in-between. I'm curious if he and I take out an FHA loan, but he lives in the property while I stay in TX, would that be frowned upon by the lender?

Essentially, it's a partnership, where I'm putting the down payment down, etc. but I need him for the location. 

Does anyone in the group have any experience with this type of arrangement for out-of-state investing? 

Thanks all! 

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Cary Verner
Real Estate Agent · Edmond, OK · Member since 2016 · 10 posts · 6 votes
4y

Hey Travis,

Nice to speak to a Grand Prairie/Arlington native! I graduated from Arlington Lamar and my parents still live in GP. I can say that OKC does have several 2-4 unit options. There are more duplex options here than tris or quads but there are still several to be found. I would personally discourage you from pursuing an FHA loan as they are weak loans in the eyes of the seller and they require more nit-picky approval than a conventional loan. Also, with owner-occupant conventional loans the requirement is only 5% down and there are many lenders who wouldn't care that the money for Down Payment is coming from family. It happens all the time.

If you need to b connected with a lender, let me know. I'm working with a lender who is AHEAD OF SCHEDULE currently (which is an excellent trait in a lender). 

Good luck with your House-Hacking/multi-family investing!

Go Cowboys!

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  • Cary Verner
    Real Estate Agent · Edmond, OK · Member since 2016 · 10 posts · 6 votes
    4y

    Hey Travis,

    Nice to speak to a Grand Prairie/Arlington native! I graduated from Arlington Lamar and my parents still live in GP. I can say that OKC does have several 2-4 unit options. There are more duplex options here than tris or quads but there are still several to be found. I would personally discourage you from pursuing an FHA loan as they are weak loans in the eyes of the seller and they require more nit-picky approval than a conventional loan. Also, with owner-occupant conventional loans the requirement is only 5% down and there are many lenders who wouldn't care that the money for Down Payment is coming from family. It happens all the time.

    If you need to b connected with a lender, let me know. I'm working with a lender who is AHEAD OF SCHEDULE currently (which is an excellent trait in a lender). 

    Good luck with your House-Hacking/multi-family investing!

    Go Cowboys!

    1Reply
  • Ben ScottPro Member
    Property Manager · Oklahoma City, OK · Member since 2019 · 579 posts · 351 votes
    4y

    I think a lot would depend on how you take the deed; as joint tenants or tenants in common. FHA will want verification the person signing the mortgage and promissory note will live in the property, I'd think.

    Also, as an agent in Oklahoma City, the market has gotten way more competive for small multi-family. We have more than north Texas, most likely. But most of our small multi-family is older and they are going for over asking price.

    0Reply
  • Reid Chauvin
    Lender · Nashville TN - Licensed in AL AR DC FL GA LA MD TN, TX and VA · Member since 2021 · 583 posts · 338 votes
    4y

    Hi @Travis Newton - you should be able to use an FHA loan, HOWEVER you will not get the benefit of the 3.5% down payment in this situation. When you have a non-occupying borrower on an FHA loan for a multi-unit property, you must put 25% down. At that point you might as well use a conventional loan if you have decent credit. It's been difficult to get FHA offers accepted lately.

    1Reply
  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    4y

    Will your relative be on the deed?  

    Owner occupancy is required, and unless you are not planning to do so, I would go conventional.  

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