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Caleb F.
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FHA for 2nd multi-unit property - are these issues real?

Caleb F.
Posted Sep 20 2022, 09:45

So about a year ago I purchased a duplex using a first time home buyer mortgage - it was NOT a FHA loan. From what I'd casually read, I figured this meant it would be fairly straightforward to use a FHA loan to purchase a second, multi-unit property a year later which would be my new primary residence; most people just cite that having 2 FHA loans at a time is the issue. However, in talking to my mortgage broker (who is well respected in the area for multi-unit properties), he is bringing up multiple issues I was unaware of. I was wondering A) if these issues are real or if I should seek another lender's opinion and B) if other's have had similar issue and if they have found a way around them. Issues he brought up include:

1. The 100 mile radius rule (no 2nd FHA loan unless moving 100+ miles away or getting a larger family - I will be doing neither) - I thought this only applied if my first loan was an FHA. He says it applies anyway because the first property was a duplex. In addition he say's this rule prevents me from applying rental income from the first property towards my DTI for the FHA.

2. He also sent me a document stating that for an FHA on a second property, I must have 25% equity in the first property. I will not be close to this, and hadn't heard this rule before.

3. He said even if I am able to meet all the guidelines, it will still be up to the underwriters discretion to approve me, and if the underwriter decides the purchase of a new property is just to acquire another investment property they'll likely deny me anyway.

Has anyone else heard of or had these issues? Is there a way around them?

Thanks!

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