How does Federal Housing Assistance work (FHA)?

[Tenzin Sherap]

Hello BP community!! So lately I've seen people talk about FHA, and I heard that you get a really low down-payment(3.5%) and that sounds really good for a 19/yr who is just starting out! And I also heard that you have to live in the house for about a year to get the loan? So please share your experience and knowledge! Thank you BP community!

[Justin Sheley]

FHA is a great tool to use especially if you are house hacking a multifamily unit. I am actually closing on a two family this month that I used an FHA loan on. This means that I was able to lock up a 3.25% interest rate on a 30 year loan while only a 3.5% down payment. My wife and I will be living in the property for the one required year and then moving out. This house hacking method using the FHA not only means we will be living essentially for free, but the low interest will help this property cash flow great when we move out. It is important to remember that the loan stays with the home even after I move out. So I will continue to reap the benefit of the FHA. However, after talking with my local lender, my understanding is that any individual can only have one FHA loan. So you cannot continue to repeat the process taking advantage of the low down payment.

It's great that your 19 and thinking through this stuff, I wish I would've done the same at your age. I hope this helped a little with FHA loans.