FHA Loan to Buy a Second Duplex

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I bought my first duplex using a conforming loan bought by Fannie Mae. I've lived there for several years and its worked out great. I'm past the required occupancy period and I don't pay PMI. The rate is 3.75% with 27 years left so it would be hard to justify refinancing. The LTV is maybe 65%. I have no interest in selling it as it has been very profitable.

However, here's my unexpected problem and opportunity. The neighboring property owner is selling due to health reasons and I'd like to buy it if we can come to a reasonable price. I'm told I need a 25% down-payment and significant reserves for another conventional note, which I don't have handy. I could raise it, but it would be expensive money or I'd have to beg the bank of Mom and Dad.

Assuming I qualify financially, would I qualify otherwise for an FHA note if I move there? I know the mortgage insurance expensive (and that's why I didn't go that route on the first one), but I think the FHA note will require a 3.5% downpayment and won't require reserves. What am I missing? Will this work?

I'd rather a reasoned answer here than from a banker who will make a buck off my ignorance!


Great Question! Eager to see some out of the box answers. My initial thoughts are that FHA should work the way you are proposing with 3.5% down and no reserves since it will be owner occupied. The other part of this equation with be your debt to income ratio. Since you have owned the other property for 3 years and can show at least 2 years worth of rent roll for it, That should accepted by some banks/ credit unions as income and will bring your debt to income ration down a bit. Could you give ball park numbers of what your income/ rent income/ price of first property/ estimated price of second property is plus any additional debts owed and any additional income you may have. Also give brief employment history. Somewhere in those numbers will be your answer. Most people can give you a ball park with that info and tell you your best course of action. Though the bank of mom and dad may give you the best rate lol!!!