Hi BP community -
I am a beginner to real estate investing and my goal is to buy a multi-family (maybe 3 or 4 units) by the end of the year. My aim is to buy it via FHA loan and will probably be my first investment property.
My parents deeded the single family house that my family currently owns to my brother and I. My parents and I still live in the house and when I am able to buy/invest in something, I will move out and my parents will still live in the current home (I am not likely to sell the house unless my parents are willing to move out).
From my current understanding, FHA loan is, in general, for those looking to buy and live/own their own house. Since there is already a house in my name, am I able to still get a FHA loan? If I can get one, are there any "penalties" for currently having something in my name?
Any help clearing up this point would be much appreciated!
My wife is in lending so I asked her.
Yes, you will be able to get an FHA loan if you'll be living in the property, but on an FHA loan when financing a 3-4 unit property only a portion of the other units, typically 85-90%, can be used to cover the PITI. So if you buy a 4 unit property, live in one unit and the other 3 units rent for a combined $3000 per month (hypothetical), lenders will only count $2550-$2750 of that to cover PITI. I hope that makes sense. Regardless, be prepared to come up with a down payment, which will be calculated based on the cash flow of the property.
Also, and this varies by lender, but most lenders will count at least half of the taxes and insurance payment of your current house toward your debt. Some lenders will count the entire amount, even though your brother is responsible for half. So that will factor into your debt to income ratio.
I hope this helps answer your question and best of luck!
@Eric Black - thanks for the clarification! This definitely helps and I didn't know that the taxes+insurance on the current house would be included in the debt to income ratio. Having that will definitely help with figuring out the numbers. Please pass along a thank to your wife for providing the info.
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