Low downpayment after FHA loan?

6 Replies

We currently have an FHA loan but are moving out of the property after 18 months. Can we get another low downpayment (5%) primary loan on a 4 unit? Thanks.

@Account Closed Well it depends, but I’d say generally yes. There are a couple of options I can think of.

1- You can refinance your current FHA into a conventional if you have enough equity in the deal (20% minimum).

2 - Freddie Mac also offers 5% down conventional loan that you can use for multi families up to 4 units. So you can try to get that directly without having to refinance your FHA mortgage.

Account Closed the answer here is likely "no" but it could be a "maybe".  Some things to know here:

Let's say you want to get ANOTHER FHA loan on your new property. Having 2 FHA loans is permissible if you are moving because your job relocated you to another town or something to that effect. Usually 90 miles or further is what FHA wants to see. Likewise FHA allows you to have a 2nd FHA loan if your family grew in size which means you need a LARGER home....so you would have to buy a larger home to live in type of thing. However, if you go this route AND need the rental income from the property you are leaving then FHA will require you to have 25% equity in that property in order to use the rental income to help you qualify. That's a lot of equity to need if you purchased 18 months ago with the minimum.

Refinancing out of your Property - this is probably also not likely, but certainly worth exploring. You would need 25% equity to refinance into a Fannie/Freddie loan. Again, if you put the minimum down, and rolled in the FHA funding fee of 1.75%, this will be really difficult.

Freddie Mac - the Freddie Mac loan referenced above will allow a low down payment as long as you don't own more than 1 other property.  However, you have to income qualify for that product.  Meaning, if you make too much money, you can't get the loan.  There are some areas across the country that have ZERO income requirements though.   So this is worth exploring but just know it's harder to qualify for it.  It's called the Freddie Mac Home Possible loan.

*WHEW*  I know this was a lot but this is the right information for you to know about.  Feel free to ask anything additional if you need.  Thanks!

@Andrew Postell My understanding is that the income limits waivers in low income census tracts was killed by Freddie this summer.  Are you award of other areas where the income limits are waived?

https://guide.freddiemac.com/app/guide/bulletin/2019-16