FHA 203(k) or Homestyle® Loan - Which is the best first loan?

[Alex Nelson]

Hello people of bigger pockets! 

I'm looking to get into real estate investing (shocker right?) and have decided that buy and hold is the way I want to go. initially i planned to get a normal FHA loan to get a duplex, but these do not allow for renovations to add equity. I've recently discovered the FHA 203(k) loan which would allow me to borrow my renovation budget to help me gain more equity in my first purchase. I also found the Homestyle® loan which is very similar. from what I understand, the homestyle® loan gives a bit more flexibility of the renovation, requires slightly higher down payment (at 5% down, this still makes for a much more affordable first buy), and allows you to end your PMI after 22% equity, which seems very attractive to me.

I want to know what you guys recommend! what are the real advantages/disadvantages to these? I feel like I haven't seen much about either of these on the BP forums and I'm wondering if there is an Achilles heel to these types of loans that I'm not seeing. I feel like the added equity would make it more than worth the slightly higher payments for the increased value on the loan. Is there more stipulations to these two loans that what I've said here? any advice would be appreciated!

I would love to hear your experience if you've used either of these two loans!