FHA Loan Do or don’t?

Question

I’m trying to decide which direction I should step. For my first property I’m considering buying a duplex or triplex in the Orlando area, Rehabbing the property for 10% appreciation, and renting each unit out. I have no major loans and my credit score is in the low 700 range. I’ve heard that I can get an FHA loan for as low as 3.5% down with 2.5% interest rates but you are required to get higher Mortgage insurance Premium. In my position would it be better to go the conventional route or use an FHA loan? Thoughts?

Harjeet Bhatti · Answer

@Cristian Garcia You have one more option of Home possible loan with 5% down payment. Home possible has lower MI option.  The best approach will be get a presentation of both products from your lender.

Varun Talluri · Answer

@Cristian Garcia another thing you will need to consider is that for FHA loan the property should be the primary residence of the borrower which means you should live there.

Shawn McCormick · Answer

Hi @Cristian Garcia, the others that have replied have some good advice. With FHA you will be required to live in the property or the lender could call the loan due. You will have PMI on an FHA loan and that could eat at your cash flow, so it typically doesn't work well. If you are looking for value add properties, there are programs that have built in renovation budgets and work with both FHA and conventional loans.

Happy to discuss and/or have you speak with one of my lenders to see what the best route for you would be. Feel free to reach out anytime!

Joshua T. · Answer

@Cristian Garcia Private Mortgage Insurance (PMI) is required on almost all loans greater than 80% loan to value. FHA is unique in that the only way to get out of it is to refinance once your loan balance is below 80% of the appraised value. Other mortgages will let you out of it with just an appraisal.

Should you do FHA? Depends on on the total cost of the PMI + refinance vs. the total profit you’ll get putting the extra cash somewhere else.

Cristian Garcia · Answer

@Harjeet Bhatti Thank you I’ll for sure look into it

FHA Loan Do or don’t?

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