My wife and I are thinking about doing the multi-family, FHA, Hack your housing strategy here in the Burbank area.
The down payments are extremely large, even for an FHA here in the LA area.
My question is, is it legal to have a partner for FHA loans. My wife and I would live in one unit, manage it, and then move on to another the next year, rinse and repeat. We would like to add a partner that can add capital and experience to a deal.
Let me know what you think, or even if this is legal/possible.
I think you are supposed to wait 2yrs for another FHA loan but I am not 100% sure about that. Is an FHA not 3.5% down payment? You should not need a partner for these loans, I dont think that will work.
FHA does allow the same 3.5% down payment on multifamily just like 1-unit FHA financing and gift funds are allowed towards down payment & closing costs as long as you intend on occupying the residence as your primary. Sellers can contribute towards true closing cost and not the down payment.
If you're coming in with capital support, you might as well try to come in with a larger down payment and potentially avoid the mortgage insurance premium. The upfront cost and the monthly premium might be better spent paying off your investor and building equity as opposed to wasting it on mortgage insurance. Highly leveraged FHA loans, as in anything 90% LTV and higher, make it mandatory for the borrower to pay a premium in perpetuity until the loan is paid off. Remember it will essentially cost you to refinance out of the FHA and into a Conventional, so incorporate that cost into your equation as well. Chalk it up as a cost of doing business because its something you will undoubtedly have to deal with.
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