House Hacking FHA loan

16 Replies

Hi everyone, my wife and I are looking to buy a quad/triplex and live in one of the units to qualify for the FHA loan. Our plan was to live there for a year, move out and buy a personal residence using another FHA loan.

It is my understanding that you can only have one FHA loan at a time. Is that correct?

If it is correct, I'm assuming we would need to refinance our first property (the quadplex). If we do would we have to put at least 20% equity into it? Not sure if we would have enough cash to make that work. Is there a more creative way to make this happen? Thank you to all for your advice 👍🏼

If you buy the quad-plex with the future in mind then you should be investing the majority of the rents into the mortgage. This will be an over simplification but look at some simple numbers:

Year #1:

4-plex @ $400,000

FHA Mortgage (3%) =$1,700 / month = $20,400 / year

3-rents @ $1,000 / month = $36,000 / year

Natural / Forced appreciation (10%) = $40,000 

Year #2:

Refinance @ $344,400 ($440,000 value)

Traditional Mortgage (4%) = $1,650 / month = $19,800 / year

4-rents @ $1,000 / month = $48,000 / year

Natural / Forced appreciation (10%) = $44,000

2nd 4-plex @ $400,000

FHA Mortgage (3%) =$1,700 / month = $20,400 / year

3-rents @ $1,000 / month = $36,000 / year

Natural / Forced appreciation (10%) = $40,000 

With natural and forced appreciation plus the equity gained by investing rents, there should be plenty of room to lower the mortgage amount - watch out for higher interest rates because they will be something that bites after coming off a FHA loan especially if rates increase.

@Jordan McDonald you can absolutely have more than 1 FHA loan at a time but it has to be under some certain circumstances:

  • Family Grows out of current unit - if your family have outgrown your current residence you can receive a 2nd FHA loan at a new property while keeping your current FHA loan.
  • Job - Job requires that you move out of the "normal" commuting area for your first FHA property. It gets a little tricky here because each city's traffic is different but it usually comes out to about a 60 minute drive. So if your job is transferring you across town...that may not be long enough. But to the city next door, that might be. In each of those it would just depend on the city and traffic patterns. But you can keep your current FHA loan and have a 2nd FHA loan if that were the case.

Feel free to ask more questions if you need.  Thanks!

Thank you for the response Scott. How much cash/ what type of improvements does it usually take to get forced appreciation up $40,000? Also, how much of a raise in interest rate are we talking about coming off of a FHA loan?

Thanks Andrew for your response. I don't think I would be able to qualify for that second FHA, as we would be living in a small college town where none of the commutes would be close to an hour and I don't foresee our family growing much in the near future (we had twins last year).

We do have really good credit though, 730 -750. Would we be able to get a conventional loan with a similar amount of money down (3.5% down) with the same scenario as my original post and not have to worry about FHA?

@Jordan McDonald if you use the @ and our names it will notify us to respond. Most conventional loans require 5% down but there are some conventional loans that will allow 3% down. Also, "family growing" can absolutely mean that your kids are getting bigger. The total number of family members isn't the deciding factor for FHA loans. Feel free to ask more questions if needed.

Look into the conventional first time homebuyer loan called HomePossible. It's only available if you haven't owned any homes in the last three years. Conventional loan with 5% down, and up to 4 unit properties.

You could use this one, then have your spouse use it on your next purchase, and then use an FHA loan for your third property.

If you do want to use it twice, you'd need to make sure to only put one of you on the loan so that your spouse is still a first time buyer for the second purchase.

Just curious, where are you looking in SLC? (I have rentals there and know the area well.) The multifamily units I've seen there in the last few years are fairly rare, and priced high.

James Marshall we are planning on moving to College Station, TX in the next year to be closer to family. I'm focusing mainly on that market and the surrounding areas. I've done a little bit of poking around in SLC. You're definitely right, quite the sellers market right now it seems

You can ask a lender about both, but if you qualify for HomePossible it is better because it only charges you one form of PMI, while FHA loans charge you for both forms.

You can ask a lender about both, but if you qualify for HomePossible it is better because it only charges you one form of PMI, while FHA loans charge you for both forms.

Very few people qualify for HomePossible, because you have to meet several criteria: not have owned a property in the last 3 years, not be above a certain income (it's $66,000 in my area), good enough credit score, etc.