Hamilton, OH · Member since 2015 · 19 posts · 3 votes
Hello,
Currently in the market for a 2, 3, or 4 unit property - this will be my first home and I intend to owner-occupy one of the units and rent out the rest. I had just assumed that FHA (or 203k) would be the only way to go, however I have noticed other options. I am looking for a loan that meets the following criteria:
Less than 10% down
Can be used on a 2, 3, 4 plex
Owner occupied property
No Mortgage Insurance (PMI/MIP)
FHA loans seem to meet all of these criteria, though MIP is required - this can add quite a bit to the cost, just looking for other options. If none exist, my plan would be to get a FHA loan and refinance to a conventional loan after it reached 80% LTV. Suggestions?
Investor · Towson, MD · Member since 2014 · 472 posts · 257 votes
9y
@Account Closed
You can purchase another property using FHA after refinancing your current place into a conventional loan. However, there is a very big caveat to that: rental income from the vacating home cannot be used as effective income on the new primary residence unless the new home is more than 100 miles away.
Currently in the market for a 2, 3, or 4 unit property - this will be my first home and I intend to owner-occupy one of the units and rent out the rest. I had just assumed that FHA (or 203k) would be the only way to go, however I have noticed other options. I am looking for a loan that meets the following criteria:
Less than 10% down
Can be used on a 2, 3, 4 plex
Owner occupied property
No Mortgage Insurance (PMI/MIP)
FHA loans seem to meet all of these criteria, though MIP is required - this can add quite a bit to the cost, just looking for other options. If none exist, my plan would be to get a FHA loan and refinance to a conventional loan after it reached 80% LTV. Suggestions?
Thanks everyone!
That's correct, with an FHA loan you are able to put down as low as 3.5% but the draw back is having that monthly PMI. I've talked to a broker about this strategy for my future investments and he agrees that using a low down payment FHA loan and live in that property for 1 year then refinance it to a conventional loan so that you can use an FHA loan to buy another property. Hope that helps.
Investor · Towson, MD · Member since 2014 · 472 posts · 257 votes
9y
@Account Closed
You can purchase another property using FHA after refinancing your current place into a conventional loan. However, there is a very big caveat to that: rental income from the vacating home cannot be used as effective income on the new primary residence unless the new home is more than 100 miles away.
You can purchase another property using FHA after refinancing your current place into a conventional loan. However, there is a very big caveat to that: rental income from the vacating home cannot be used as effective income on the new primary residence unless the new home is more than 100 miles away.
Michael Cohen: Any idea if state lines impact this at all?
I understand that the MIP can be rolled into the loan initially, however my worries would lie in the costs of the re-finance....If it takes a considerable amount to refi then it might not be worth it, and worth it to just keep the monthly MIP.
You can purchase another property using FHA after refinancing your current place into a conventional loan. However, there is a very big caveat to that: rental income from the vacating home cannot be used as effective income on the new primary residence unless the new home is more than 100 miles away.
From what I was told, If you have less than 2 years of land lording the new lender may not use all the income coming from your previous rental property, only 75% to be precise. After having a couple of years land lording, The lenders will come and see that your income from your rental properties will be seen as 100% gross income.
You can purchase another property using FHA after refinancing your current place into a conventional loan. However, there is a very big caveat to that: rental income from the vacating home cannot be used as effective income on the new primary residence unless the new home is more than 100 miles away.
From what I was told, If you have less than 2 years of land lording the new lender may not use all the income coming from your previous rental property, only 75% to be precise. After having a couple of years land lording, The lenders will come and see that your income from your rental properties will be seen as 100% gross income.
The 2 year thing is an overlay from your bank. You can find lenders that will use rental income from day 1.
Investor · Towson, MD · Member since 2014 · 472 posts · 257 votes
9y
The use of only 75% of income it to account for maintenance, unexpected vacancies, etc. That isn't restricted to any time frame, they always use 75% and that's not him overlay. That's a Fannie/Freddie and FHA guideline.
You can purchase another property using FHA after refinancing your current place into a conventional loan. However, there is a very big caveat to that: rental income from the vacating home cannot be used as effective income on the new primary residence unless the new home is more than 100 miles away.
From what I was told, If you have less than 2 years of land lording the new lender may not use all the income coming from your previous rental property, only 75% to be precise. After having a couple of years land lording, The lenders will come and see that your income from your rental properties will be seen as 100% gross income.
The 2 year thing is an overlay from your bank. You can find lenders that will use rental income from day 1.
Thanks for the tip, I guess you really do have to Inquire from different lenders.