This is my first purchase (finally) I know that if I use the 203k I'll have a lot of HELOC available to pull out for a second property. But I'm not able to use the first time homebuyers grant. My question is if I was to go for a regular fha for my first property can I still use a 203k for a second one or would I have to refinance my first into a conventional loan.
@Kiara Washington you should speak to a good lender to get these kinds of questions answered. The rules change constantly on this, and I always refer my clients right back to the lender for these types of questions. You should also look into the 5% down conventional loan for up to 4 units. It sounds more expensive, but often ends up being a much better loan product.
The 203k loan is everyone's favorite loan here on BP, but it is a tough loan to pull off. You must have a GC, which means your rehab costs will be higher than if you paid out of pocket. This often times means that you end up over paying for everything and not really having any equity to "BRRR".
203k loans are also tougher loans to close as there are additional hoops to jump through. I have closed only one of the three 203k transactions where I represented the buyer this year. One deal closed, one fell apart, and the last one the buyer walked because the rehab was so much that he didn't feel comfortable that he would get his money back through a refi or HELOC.
@John Warren wow thanks for the insight! I’ll reach out to my lender today.
@Kiara Washington @John Warren gave you good advice. If you are using a first-time home buyer grant like IDHA there are different plans and some require that you live in the property for so long and some come with prorated repayment obligations if you move early. I agree with John regarding the 203K loans; my lenders have told me the same thing - they can write them, but they rarely go through. Some lenders do 1% conventional loans. If you are trying to flip a property I know a great lender that specializes in that area. Good luck!
@Kiara Washington It sounds like you've already reached out to your lender, so hopefully they answered your question.
In the case that your question hasn't been answered:
FHA loans are intended for owner occupied primary residences, which means generally someone can only have one FHA loan at a given time. There are a few exceptions where FHA will allow you to have 2 FHA loans (meaning you are leaving your current primary and trying to move into a new primary residence using a FHA loan).
- Relocation for an employment-related reason, to an area 100 miles from your current primary residence
- Increase in family size (legal dependents) and the property now fails to meet family needs, and you also have at least 75LTV (In the home you would be leaving)
- Vacating a jointly-owned property with no intent to return (Most common in divorce situations)
- Non-occupying co-borrower, meaning you co-sign for someone so that they can buy a home using FHA, but you already own one
If these situations don't sounds like yours, you will have to either sell your current primary before you can purchase a new one using a FHA loan, or refinance your current primary to a conventional loan before you can purchase a new primary residence using a FHA loan. Most people recommend getting your foot in the door with a FHA loan, and then as you acquire more properties you will use conventional loans (larger down payment).
Best of luck with your purchase!
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