FHA or conventional loan???!

2 Replies

I’m a 21 year old male trying to acquire 4 different rental properties from one of my fathers friends. He’ll let them all for go for a total of $175,000. Total rental income it brings is $3150/mo. I’ve never bought a home or use any type of loan for anything. My credit is a 784.

No bills besides phone and food so my DTI ratio is great. I wanted to know if there is any way possible I could get a FHA loan (first time home buyers' 3.5% down loan) for these homes. Maybe using a smaller, more local bank could help?

Located in Cincinnati, Ohio

Hi Lawerence,

No FHA will only lend on 1 home to you if you intend to occupy it as your main residence. The other 3 you will need to go get conventional loans probably requiring 25% down.

Lawrence,

With your credit score, for a low down payment program you should be looking at a conventional 97% LTV program, preferably either HomeReady or Home Possible as they have better mortgage insurance rates as well as interest rates. Depending on how pricing is during the day, I'm finding around a 680 credit score is where we are seeing the break even point on which is a better deal. Unless pricing is odd, below a 680 score FHA will be the better deal, and above a 680 score Conventional will be better one. I know that it doesn't apply to you because you're purchasing from a family friend, but Conventional financing also gives you an advantage in a multi-offer scenario over anyone with FHA, as many realtors believe that Conventional financing is not as likely to fall through as FHA. Please note that this 97% LTV program could only be used for one of the residences in the portfolio - the one you intend to occupy. Frank is correct, the other three properties you must have 25% down for traditional financing, although you could maybe seek out private financing.