3.5% FHA or 5% Conventional w/ NO PMI

[Michael Cavitolo]

I'm looking to purchase my first property and house-hack a 2-4 unit, owner occupied. Planning to live in one side for one year, then move out and rent out my side. 

One lender is offering 3.5% FHA and another is offering 5% Conventional w/ NO PMI. What are your thoughts on both programs? What is a better route to expanding a portfolio?

My theory is with no PMI, lower monthly payment so it might be easier to cashflow? The goal is to retire in 14 years off rental income. I'm 26 at the moment.

Thanks!

[Tim Johnson]

Hey @Michael Cavitolo,

They're both fine - the FHA will generally come with more closing costs and fees over the long haul....and as you point out, PMI. But it's the right ticket to get you going if you're just in trouble for the downpayment.

I would go with the conventional. Although, be aware that in MOST cases, the PMI still applies for the first couple of years.....and at least until you have 20% equity.

And yes, the lower the mortgage payment and longer the terms (30 years) the more breathing room you'll have as a landlord and potential for cash flow.