FHA Loan for first multifamily and now HomeReady loan for next?

[Jeff White]

Hi All,

I'm almost at the one year mark since purchasing my 4 unit place in Denver with a FHA loan at 3.75%. I know you can't have two FHA loans at the same time unless you move far or start a family, and I'm not looking to refi it since i'm not sure if it has 20% equity, and I doubt I could compete with that rate today.

From talking to a handful of lenders, I've heard 15% downpayment for duplexes minimum and 25% for triplexes and quads.  

Also, I've heard of HomePossible and HomeReady conventional programs, and I believe HomeReady you can own other real estate and still do a low down payment program, but I'm not sure if that's only for single family homes only.  

Any other suggestions or more information from the experts?  

[Seth Wilcock]

Hi Jeff - what about refinancing your current home into HomePossible (conventional financing), live there for one more year since you would need to occupy as a primary residence for one year past closing, and then use the FHA loan to acquire your next multi-family? You can do a rate/term refinance with HomePossible up to 95% LTV on a 4-family home. I know you're not keen on refinancing since you don't want to lose your current rate and you're likely not at the 80% LTV mark, but this path would free up your options and enable you to acquire another multi-family home sooner than saving up 15% down for HomeReady.

Also, your current FHA rate of 3.750% will come with life of loan mortgage insurance of .850%. The 3.750% + .850% gives you an effective rate of 4.6%. Even if the rate is a little higher under the HomePossible loan for the R/T refi, we could look at options to eliminate the monthly MI, either by buying out the mortgage insurance in one lump sum or financing the cost of the MI into the rate on your loan (LPMI). The latter options may not appear to be as attractive, but they could possibly increase your cash flow on the quad, and allow you to purchase another property with an FHA loan a year from now.