Can I get an FHA loan if I already have a conventional?

Question

I have two properties in the Portland, Oregon area that are both financed with conventional loans. I'd like to keep them and buy another 2-4 unit multi-family with an FHA loan. It was my understanding that I could do that as long as I didn't have more than one FHA at a time. Recently a lender in the area told me I can't get an FHA if I have current conventional loans on other properties. Is that true?

Chris Mason · Answer

The "inferior" home thing just needs to make sense. Such that it's not inferior to you.

Not long ago I had someone moving from a large 4/2 with a yard to a 2/1 unit in a duplex. The original plan with the 4/2 was to get married to the fiance, and fill it with babies. But, they split up. Now, that 4/2 is a bunch of extra space that a single person does not need, it's just extra crap to clean/maintain/etc. Bonus, new house has shorter commute to work. It (probably) wasn't necessary, but I had him send me a picture of him standing next to his former fiance smiling ("before"), and another picture of him alone, carrying a mop and cleaning supplies, over-the-top frowning ("now").

Jared Rine · Answer

Agree with @Chris Mason

@Lance Nelson..you should be able to structure this.  I'd find a more flexible lender.

Lance Nelson · Answer

Hey @Jason Wray. We are currently planning a cash out refi and would have enough to put 20% down on a place, but I got some advice to take advantage of low down programs like FHA to focus on ROI and be able to buy more properties.

Can you give an example of how a deal would be structured with another REI? Thanks!

Jason Wray · Answer

Lance,

Here are a couple of options you could refinance one or more of your current properties and do a cash out refinance.  Pull some cash out and use it as a down payment on a 2-4 unit investment purchase.  If you can get at least 20% down there are programs that can get you into the next MF.  If not partner up with another REI and buy as a joint deal.

Lance Nelson · Answer

Thanks for the response @Jason Wray. I would definitely be moving to an inferior home if I did an FHA on a fourplex, but I'd be open to doing that for a year to get such a low down payment on a MF. I guess I couldn't do it if the bank considers that inferior to my current home.

Jason Wray · Answer

Lance,

The only way to go FHA to buy a MF 2-4 Unit property is if you going to live in one of the units.  The way its generally done is a person who does not own a home buys a MF as their first home and lives in the unit for (12) months.  Then after the 12 months with or without renovations they refinance the home into a conventional loan.  FHA is more of a first time home buyer program or for someone who has had credit or other issues that may not fit conventional guide lines.

It's an attractive program that offers a low down payment options but its not easy to get an FHA if you live in a superior home.  The other option for a lower down payment would be for a second home which only requires 10% down.  Unfortunately they so not allow for you to use that on a (2-4) unit.  That would have to be for a SFR (1 unit) and be an amenity style home.  Like on the beach, on a lake, river, golf course, out of state, Ski in ski out etc..

Can I get an FHA loan if I already have a conventional?

Most Popular Reply