FHA loan to house hack, Has anybody had a bad experience?

Question

I’m wanting to house hack a duplex or 4plex and a FHA loan at 3.5% sounds really enticing. The banker I spoke to said it is owner occupied,  which I understand. I’ve heard after a year you can rent out all units, but I’ve also heard that it is year occupied and 25% payoff on the loan. If anyone has experience with this and could shed some light on the subject would be great. My market is St Louis, MO.

Max T. · Answer

@Brian Bertschi

fHA guidelines can be found online

Jacob Peistrup · Answer

@Brian Bertschi hey Brian I’m also in STL and looking to do the same hopefully by years end. FHA is nice because of the 3.5% down like you mentioned, but you have to live in the property for a year and you can’t purchase in an LLC. You can wait to refinance into a conventional like you mentioned, and you’d have a lower payment and wouldn’t have to live there, but you’d likely have to make way more than the minimum payment each month on the FHA to do that in a year, OR value add / rehab / buy below value in order to have enough equity for that. Either way you need to have the equity.

I’d recommend looking at your projected return depending on your goals. How much cheaper is it for you to do a FHA vs. conventional even if for only a year? With FHA you have a low down payment BUT you’ll get less rent living there and FHA will have a much higher monthly payment with insurance than a conv, so you might not be making positive cash flow while it’s FHA. Calculate your monthly costs because they’ll be very different between the 2 loans and see if it’s worth it to you to have a lower down payment but have to live there and sacrifice rent.