Newbie with FHA question

6 Replies

Hey everyone! 

I am new to BP. I have been listening to the podcasts for months and lurking on the forums (briefly). I have checked out BP YouTube videos and also recently started reading Brandon's book on rental property investing. 

I am finally starting to feel pretty comfortable with the knowledge I have gained. My plan is to begin by investing in a tri-plex and living in it, aka house hacking. I hope to secure an FHA loan to finance this and rent out the other two units. From there I want to continue to acquire a new single family or multi-unit homes each year from my first purchase. I live in Lincoln, Nebraska and plan to begin investing locally.

So I have some agents showing me tri-plexes in the area tomorrow. When I was in college I was pretty irresponsible with my credit card. As a result of being a dummy, my credit score is at about 655. I have no debt and probably enough savings to use a 20% down conventional mortgage. Although this would eat up nearly all my savings. 

I have heard some conflicting info on using an FHA loan for a multi-unit investment property. Would there be any reason I would get denied an FHA loan given my circumstances? Should I wait to invest and work on my credit? Any advice or information would be much appreciated!

Thanks everyone! Very excited to be apart of this community!

@Andrew Alpsteg I would not wait to invest if I were you. The FHA loan program is a great program for first time investors like yourself. The only issue my clients have is that the really "great deals" are normally in a little rougher shape and won't go FHA. One work around is to use an FHA 203k streamline, which several of my clients are doing now in Berwyn, one of my target markets. This requires a really great lender and general contractor to pull off though.

In your position, I would make sure that your lender has worked with a lot of investors. Believe me when I say, not all lenders are created equal. 

Thanks for the input John! So if I understand this correctly, it’s possible a lender may not give a loan if the property is a “fixer upper”, but a way around this is to use a 203k streamline and make improvements to the property? I appreciate the response.

@Andrew Alpsteg You should not have trouble receiving financing with FHA given your credit score (FHA was made to help first time home buyers, your credit could be as low as 580). You are debt free which is a big plus and you have the capital reserve which they will also want to see.

The biggest concern, as previously stated, will be finding the triplex that will pass the FHA inspection/guidelines. They can be strict but as long as there are no major issues you should be fine.

Best of luck!

Andrew,

I work with a local mortgage lender who helps buyers improve their credit score, and he is well versed in FHA lending. Let me know if you want his contact info.

On a separate note we have a group of investors who meet once a month. Let me know if you want information about that also.

Lance

Does the fha loan cause any conflict for the 2nd and 3rd investments? Also, if I use a fha to buy the home can I start renting it out or do I have to live in it for a period of time? Thanks for the help everyone!

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