1st investment property: USDA or FHA

[Louis Luciano]

Hello BP community. My wife and I are planning our first big RE investment. We are debating between using a USDA loan for a live in flip or using an FHA loan for a multi-family property. We are located in Charlotte, NC, and here is some back story to help encourage professional opinions. As of right now My wife is a full time student at UNCC scheduled to graduate in December of this year (Woohoo!!) as of right now I am the only source of income for our family ( we have two little ones as well.) We have been saving what we can and educating ourselves in order to make the best financial decision but we are torn because... I really want to go ahead and get pre approved for an FHA loan in order to buy a house hack, but we are still working on saving capital and due to our budget limitations, I am fearful that in order to get approved we will have to wait until my wife has two years of income under her belt and both of us can be on the loan and we can do our first house hack. On the other hand I have researched USDA loan option here In NC which would allow us to make our first investment (live in flip) by the beginning on 2019 with just my income. We both are fairly handy and have connections to family members who would be a big help in the renovation process, considering we would have a minimum of a year to make the proper renovations. One of my unfavorable characteristics is that I can be a tad impatient. I do not want to wait until we have more money saved up and my wife has her work history before we make our move, but I also want to be sure that if we do make a move it is a smart and calculated one. Which would you guys suggest given the little bit of information here on this post? Thank You in advance!!

[Samuel Collier]

Here are some things to consider; USDA loans were created for low income rural housing, so not everyone house is eligible for a USDA loan. Here is a link to the eligiblity map

https://eligibility.sc.egov.usda.gov/eligibility/w...

Type in the address of a house you're interested in and it will tell you if that property is eligible. I can go ahead and tell you the majority of houses in Charlotte will not be eligible. You'll have to find a suburb or a low-income census tract. A benefit of a USDA loan is that it has lower credit requirements, and it offers 100% financing, but there are income limits. and if you find a house in a USDA eligible area, you're going to seriously limit your market for rent and/or resale due to low population. Is there a particular reason you want to get an FHA loan rather than a conventoinal? If you have at least a 620 credit score, you can get a conventional loan for 3% down if you're a first time homebuyer and you plan on living in the property. I say that because most people gravitate to FHA because of the low 3.5% down payment requirement but you can get that with a conventional loan which is a lot of times better because the mortgage insurance goes away on a conventional loan once you have 20% equity whereas FHA loans have mortgage insurance for the life of the loan if you put less than 10% down. FHA loans have lower credit requirements (only need a 580) and have more favorable interest rates with lower credit scores, but if your credit is decent (650 or above) it probably makes more sense to go conventional.