FHA 203k Loan for first property

[Kyle Merritt]

Could I purchase a property using a FHA 203k loan, allowing me to renovate the property as well. Live in it for a year or so, refinance then rent it out?

Advice please, thanks 

[Adam Detig]

Yes. To my knowledge that is exactly how that process works. The FHA loan will require a minimum of 3.5% down payment and owner occupied for a minimum of one year. The additional 203k aspect of the loan will allow you to finance the renovation costs into the loan. I believe there is also a requirement for the 203k loan that you must use approved contractors to do the work. Not 100% sure on that one.

Also, it is not certain that you will be able to refinance after one year. If you bought a great deal and have equity in the property to begin with, you most likely will. However, if you buy at retail price, you will not have worked up to 20% ownership in that one year. If you do not have 20%, conventional loans may decline a refinance. So either have a great deal to start by having equity already in the home or be prepared to pay out of pocket to get to 20% after the first year.

Best of luck