How quickly can you get another FHA loan?

26 Replies

I used an FHA loan for my first triplex to househack and after a year would like to use an FHA loan to househack another triplex. My mortgage broker told me I would have issues with this because the underwriter would see that I moved so quickly from one multifamily property to the next and question the reasoning for moving.

Has anyone had success in using an FHA loan within ~1 year after originating the first? Any other strategies for using a second owner occupied low down payment loan for a multifamily househack?

Are you going to refinance the first property before attempting to get another FHA loan?

Yes, I plan to refinance into conventional with 20% equity a few months before and then be free to use another FHA. It seems this might not be well received since FHA loans are intended for getting people into homes, not allowing investors to easily acquire properties.

@Christian Allen

12 months min to live in the property- 

Using the FHA loan is your best bet for low money down (if you can refi first)

I am not sure if there are specific rhode island owner occupied programs. If you can't do FHA, you may be looking at 20% conventional

I will be fulfilling the minimum 12 months, more likely 14 months until I'd be looking for another property. I was just wondering if anyone had success in getting a second FHA loan almost immediately after completing the minimum occupancy requirement.

I will ask a few other banks to see what their experience is with FHA loans.

Christian, if you're going to make money on the sale, you might consider staying 2 years so that the profit will be tax free (see The $250,000/$500,000 Home Sale Tax Exclusion: One of the most valuable deductions ever when you sell your house). That would probably solve two problems at once, the FHA moving-too-soon issue, and having to pay taxes on the gain.

Other than that thought, I haven't personally had experience with moving just a year after closing on the first property. But the thought of paying 40% taxes on the gain (or whatever your highest marginal tax rate is) would keep me there for another year. YMMV :)

@Anthony Thompson I plan to keep the property as an investment and just move somewhere else in the city to buy another multifamily.  My strategy was to use owner occupied loans to move around to different multifamily properties slowly acquiring investments without putting down a large amount of cash up front.  My mortgage broker said if I can justify the move by saying the new multifamily was in a better area, bigger house, larger bedrooms etc it might pass through underwriting more easily.  

Your lender may require a letter of explanation, but any one of the reasons should be good enough to justify moving and qualify you for that FHA loan.

Originally posted by @Christian Allen :

I will be fulfilling the minimum 12 months, more likely 14 months until I'd be looking for another property. I was just wondering if anyone had success in getting a second FHA loan almost immediately after completing the minimum occupancy requirement.

I will ask a few other banks to see what their experience is with FHA loans.

I suggest you DON'T mention to any Banks about your goal of always moving the day after you're technically "allowed to". 

My biggest concern with your plan is: how will you easily turn your initial 3.5% equity into 20%+ equity in just 12 months? And even if you can, don't you want to refi into the lowest interest rate?

ie. a CONVENTIONAL owner-occupier loan?

And you know what that'll mean: ANOTHER year stuck, champing at the bit.

But if you DON'T want the lowest fixed interest rate, then sure - be impatient...

@Brent Coombs understand your reasoning, I wouldn't directly ask how I can move immediately after fulfilling the minimum requirements.  

The way I turned 3.5% into 20% is from a doing a live in flip.  I bought a triplex that was in rough condition and did a complete renovation of all 3 units.  Similar condition properties in the last few months have been selling at a price that would give me my 20%.  

My cashflow after expenses on my primary is about $1200 not including reserves.  I would take a hit on a higher interest rate (maybe 1% higher) to allow me to get a second property of similar type with as good cashflow.   

@Christian Allen I'm 4 months into a househack myself. I did similar, bought a place with incoming tenants for summer semester.... remodeled kitchen, bathrooms updates, and block windows along with some minor things such as paint, cleaning, etc. I bought it for $176.5k, it appraised for $180k, looking to refi after my 6th payment(6months). My lender said he could have me in another FHA after refinancing first into conventional. He said he himself did this 5 times when he was younger. I'm sure it helps to have a reason.... he said likely they won't require any reasoning as to why you're moving on so quickly... but if they do, things such as needing a garage, or off street parking will suffice.... moving closer to work... etc. Good luck.

@Jake Walroth , aah, yes, your key was "he could have me in another FHA after refinancing FIRST into conventional". @Christian Allen can use that same key - any number of times!...

@Christian Allen

Are you refinancing into an investor loan product or owner occupant conventional ? When you refi into an owner occupant conv loan it will come with the same expectation of occupancy for 1 year after the refi. Additionally, the underwriter for the FHA loan is going to look at that as well. FHA looks at OO loans and not just another FHA loan. The exception with FHA for have more than one OO loan are moving more than 100 miles for job related reasons and increased size of family(Ex. bought a 2 bedroom and now have had a couple of children). There was another thread regarding this a week or so ago where there were denied with basically the same scenario

Hey Christian, I’m going through the same thing currently. I bought A 3- family a year ago,but used a conventional loan with a down payment of 5% now I’m looking to buy my next house hack using the same strategy, but having trouble getting financing. The biggest issue is the lenders I talk to won’t use my rental income as a means to lower the Debt to Income ratio.Just seen this post and wanted to know if you had any luck with lenders or any advice since you’ve been thru this.
Thank you

@Allen McGlashing I was successful in finding a lender who would use 75% of my gross income based on current leases. The important part for me was being able to refinance out of my current FHA with 25% equity to convert it into a investor loan since it was a 3 family. The lender had no problem doing another FHA just after the 12 months. My advice would be to search around for local banks. They are more familiar with the area and may have more confidence writing the loan using current leases.

Hey Christian, thank you for your insight it won’t let me tag you in my reply so hopefully you see this; anyway once you refinanced out into an investment loan were you able to have a low down payment for the next FHA multi-family loan. I want to figure a way to put down 3%-10% on my next owner occupied multi-family the lowest down payment I found so far is 15%. One other question once you refinanced out of your first loan into a investment loan how dramatic was the change in interest rate? I currently have a conventional loan with PMI at 3.25%APR.
Thanks for sharing your experience

@Allen McGlashing Yes I was able to get another low down payment FHA loan. I actually ended up doing a 203k FHA loan. As long as you do not have a FHA loan at the time you should be qualified to get one. As far as the interest rate, I went from 3.625% with PMI to 4.5% without. Ended up being the same payment but well worth it since it allowed me to purchase another house hack property.

@Allen McGlashing

The rates are climbing up a bit...your 3.25% rate is extremely low ! 

You can have one FHA loan at a time... so hopefully you can go low money down for your next deal

@Christian Allen i know this post is a little older, but I'm in this situation now. Bought a 4 unit over a year ago and just refinanced from fha to conventional in may. Now we are looking to buy our 2nd property and are being told we should wait 6-12 months as lenders will question the move so to another owner occupied building. when you found a lender to get you another FHA did your lender on the first property contact you as to why your weren't occupying that property? were there any problems getting approval?

Originally posted by @Remone Randolph :

@Christian Allen i know this post is a little older, but I'm in this situation now. Bought a 4 unit over a year ago and just refinanced from fha to conventional in may. Now we are looking to buy our 2nd property and are being told we should wait 6-12 months as lenders will question the move so to another owner occupied building. when you found a lender to get you another FHA did your lender on the first property contact you as to why your weren't occupying that property? were there any problems getting approval?

 Was it an owner-occupier conventional loan, or, a pure investment loan? As long as it was the latter, you should be good to go, so long as your next primary is at least 100 miles away.

Why 100 miles? Because afaik, FHA won't allow you to count any of your ex-primary's rental income towards your Debt-To-Income Ratio, if your next proposed primary is closer than that. 

And you'd really want/need that rental income counted, right?

But of course, if your new mortgage is for owner-occupying, you already know your answer...

@Remone Randolph to answer your question about the first lender contacting me, no, they didn't because at that point I had already fulfilled the 1 year requirement and refinanced out of the loan. The loan I refinanced into was a conventional investment loan because I was told you were essentially signing up for another 1 year of occupancy if you refi'd into a conventional owner occupied. It came with a slightly higher interest rate but that was the cost to get into a second FHA.

I was still able to use the rental income from the first property despite not having 2 years of tax return history.  I think that one really depends on the lender you are using and what type of overlays they have.  I used a small on branch local bank so they had few additional restrictions.  

@Christian Allen yea that’s our problem. We refinanced as owner occupied instead of investment as the ltv was 75% and with cash out. 

@Remone Randolph not sure if there's any way around the owner occupied loan factor.  You can try different banks/brokers.  I have heard of some people getting a second owner occupied loan shortly after a refi.  You can ask around at different banks to see if you have any luck.  

Originally posted by @Christian Allen :

@Remone Randolph not sure if there's any way around the owner occupied loan factor.  You can try different banks/brokers.  I have heard of some people getting a second owner occupied loan shortly after a refi.  You can ask around at different banks to see if you have any luck.  

You've "heard of some people getting a second owner-occupied loan for a different primary shortly after an owner-occupier refi on the primary they want to leave immediately"? Really?

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here