FHA loans?

Question

Robert Bowles · Answer

You can purchase any 1 - 4 unit property as long as you occupy one of the units.  FHA is not great but right now the bet way to get into a home with only 3.5% down.  I hate the lifetime PMI, but you can refinance it away when your LTV works, or sell.

FHA will probably be your best bet with no credit.

Jason Eyerly · Answer

Make your 3.5% down payment, get your mortgage insurance, move in to one of the units, and either use a property management company or a craigslist ad to rent out the other unit once you are ready for tenants. After a period of 1 year you can sell the property if you so choose and move out. If you live in the property for 2 out of the last 5 years, then any capital gains you make will also be tax exempt for up to $250,000. For that reason I'd recommend using FHA, living in it for at least 2 years, and then moving on if you so choose.

Keep in mind that FHA is a little strict on the condition of the property, so you will not be able to invest in a fixer upper unless it qualifies for a FHA 203k loan, which will finance rehab and wrap those costs into the loan. That's an entirely different subject, but I recommend doing your research and due diligence on FHA Requirements for the home itself, the borrower, and FHA 203k because you never know if that might become your best option.

Best of luck!

Jason Eyerly

Jason Eyerly · Answer

I would still go for a multifamily, but either way if you are not planning on moving in, you will not be able to qualify for an FHA loan. FHA loans still have some credit and income requirements, so I find it highly likely that you will not qualify even for an FHA loan, unless you have held a steady job while in high school and are 18+. You will also not be able to qualify for any type of mortgage or finance to buy a regular single family either.

My best advice to you would be to work, get a secured credit card ASAP (or two or three) to build your credit as I did (currently 3 years in with a 780 score) and get a multifamily (2-4 units) and get an FHA loan. You will need to figure out or re-plan your plan to live in this unit, so bear that in mind. These are about your only two options, unless you can find a private lender that really likes you enough to give you a mortgage on their terms.

Holly Baldwin · Answer

Hi @Stormy Hollingsworth

This link to the HUD website might help you with FHA info.

http://portal.hud.gov/hudportal/HUD?src=/buying/loans

Also, you mentioned you are finishing high school......I am assuming you are 18 yrs old?  In order to be an eligible borrower under FHA you need to be Legal Age (18 or older) or married.

There are also maximum allowable loan limits that are set by individual counties.  You should be able to find your county from the website above and see what the loan limits are.

You also will need stable income for at least the first 3 years of the mortgage. (documented and continuous work history in order to qualify)

FHA is only for 1 to 4 unit structures.

With FHA you will have an upfront mortgage insurance premium (UFMIP) and then monthly mortgage insurance after that as well.  But the premiums decrease monthly as the loan balance decreases.  And you can request that the MIP be removed once you reach 80% of current market value (requires an FHA appraisal).

I hope this stuff doesn't scare or overwhelm you, but helps you understand it better.

Good luck and keep on learning!!

Brie Schmidt · Answer

No, The only way to get the low down payment with FHA is to be owner occupied.

Stormy Hollingsworth · Answer

ok. so what can i do if i dont want to move into the Mulitf? i am currently living in a rental while i finish high school that i would not like to move out of. would a single family home better for my situation?  @Jason Eyerly

Brie Schmidt · Answer

If you bought a duplex or triples as long as you live in 1 unit you can get a FHA loan and rent out the others

Stormy Hollingsworth · Answer

@Brianna S.  So if i got a FHA loan and put a down payment on a multifamily, how can start renting it to other to start my investment?

Jon Klaus · Answer

You can actually pay 3.5% down payment with FHA. I bought my first house that way and couldn't have afforded the down payment without FHA.

Brie Schmidt · Answer

With FHA if you are living in one of the units you will but 5% down vs 20% non-FHA.  The bad part is you will pay private mortgage insurance - basically an additional fee because you don't have 20% down

FHA loans?

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