FHA financing on a second home? (owner-occupied)

8 Replies

Hi BP community, I've been listening to podcasts and reading voraciously. Thanks for providing such a great resource.

I'm struggling to find a clear answer on this question even though I think the answer should be pretty straightforward. I own a townhome with conventional financing. (I put 20% down on a 30-year fixed loan four years ago, and the property has appreciated in value). My family has outgrown it and we are looking to purchase a new place that we would move into. We would prefer to keep the townhome as a rental (our HOA does allow rentals).

Can I qualify for a low-money-down FHA loan on my new (second) home?

Follow-up question then, if I do qualify: is this option the preferable one? I would pay PMI. The other option is to put a full 20% down but maybe I would prefer to keep the cash flexible to leverage elsewhere.

Thanks in advance for sharing your wisdom. :)

As far as I know, the fact that you own another home won't disqualify you from purchasing another with an FHA loan. If you're going to live in the new home, why not just purchase with conventional financing?

@Eric James thanks for that answer, and for the question. I guess I'm weighing the two options now. Say I can get FHA financing and put down $10K instead of $50K (using round numbers). Would it be wiser to roll the $40K into another investment, like another rental property? The cost of that choice is essentially an additional 1% of the total loan (PMI), but the potential returns on another cash flowing property would outweigh that.

What am I missing? Feel free to poke holes in my logic. 

@Melvin List I'm all ears! Would you mind sharing a few so I can do some research? Thanks for chiming in.

Originally posted by @Melvin List :

@Aaron Wakeman any conventional lender can offer you a conventional loan on a new primary home with little down.  I wish I had a contact for you.  

@Chris Mason he might have a contact in your area

 Sorry, I have no go-to in Minnesota. :\

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

@Aaron Wakeman I am in the process of doing an FHA while having a conventional right now. Buying second duplex FHA. Since I will have rental income offsetting my payment, including the PMI, I am ok with it. Especially since my goal is to eventually refinance into conventional and drop it. But I only have duplexes. The idea of paying the payment on a single family is not for me.

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