2nd FHA mortgage - 3.5%?

8 Replies

I currently own a home with an FHA mortgage in the Bronx, NY. It is a 2 family home and I live in the home.

I want to refinance to get rid of PMI, get rid of FHA, and tap equity to buy a second multi-family home in the same neighborhood with a new FHA mortgage.

A few questions:

1. Once I have refinanced, does this mean that I can take out a new FHA loan because I no longer have an FHA loan open?

2. If I can take a new FHA loan, will I only need to put down 3.5% to buy the new home (I would use the home equity loan for down payment)?

3. Can I move into the second home from the first home to make it my primary residence and use my current home as an investment property even though the second home is in the same neighborhood (since I am not trying to take out two FHA loans at once but one after the other)?

Thanks in advance for your help!

HI Michael,

the answer to all 3 is yes. since the properties are so close, one or the other would have to be a an Investment property. since this is your plan of action underwriting should have no issues as there is no means of mortgage fraud with what you plan to do. one thing you will want to keep in mind when qualifying for the new home is debt to income ratios, and having a renter with a signed lease agreement for your current primary lined up will off set the debt ratio helping you qualify with no troubles.

let me know if you have anymore questions or want to speak privately! 

Not an expert but here is my take:

As I understand it, FHA is meant for owner-occupied properties. So you could rent it out and move but I don't think an underwriter would approve another FHA if your current house is an FHA. Also, if the lender found out you turned the current place into a rental, they may punish you with fines.

If you refi and change it to a conventional loan you should be able to get a new FHA loan for your new owner-occupied place. Your credit has to be above 580 for 3.5%.

I would be careful when tapping into your current property's equity. Take a look at what's going on in my neck of the wood... Hurricanes are hurting people by lowering their property value over night and causing them to owe way more than the home is worth.

Helpful article: https://www.fha.com/fha_article?id=539

@Michael M. - You can obtain an FHA loan if you own another property. However, the big caveat is that you cannot use the rental income from the vacating income as qualifying income unless the vacating property is 100 miles away or more. Meaning your income would have to cover both notes.

@Michael M.

I am actually in the process of doing this with my current bank. We bought our 2 family in the Bronx with FHA 3 years ago. We are refinancing and reducing the rate from 4.25 to 3.65 and knocking out PMI. We are not tapping into any equity though and will fund from our personal 3.5% for the next house using an FHA loan. Check with your current lender 1st they may be able to beat out everyone else. Mines beat everyone's interest rate and is giving us a subsidy to cover all closing costs. Total payment reduction will be about $400/mo.

Originally posted by @Michael Cohen :

@Michael M. - You can obtain an FHA loan if you own another property. However, the big caveat is that you cannot use the rental income from the vacating income as qualifying income unless the vacating property is 100 miles away or more. Meaning your income would have to cover both notes.

If that's the main caveat that FHA has about re-buying/re-applying in the same area, then THANK YOU for explaining it!