Should I use FHA loan

[Louis Trinca]

Is it smart to use an FHA loan to purchase a multi family investment property as a first time buyer? Or should I pay cash for a single apartment. I thought it'd be a good idea to use fha loan since I've never purchased a property and that way I can keep my money and use it to invest in something else? What are your thoughts?

[Stephanie P.]

Originally posted by @Louis Trinca:

Is it smart to use an FHA loan to purchase a multi family investment property as a first time buyer? Or should I pay cash for a single apartment. I thought it'd be a good idea to use fha loan since I've never purchased a property and that way I can keep my money and use it to invest in something else? What are your thoughts?

 Some quick points:

• FHA is great for buying properties that have multiple units (up to 4) when you're going to live in one.
• You can do either a 203K renovation loan or regular FHA insured loan.
• FHA is not only for first time home buyers.
• FHA  is not supposed to be used to enhance someone's investment portfolio.  If you're looking at an FHA loan to live in for a while and then go do it again, you'll have to prove that you're relocating and that you're establishing residency "outside the reasonable commuting distance from his/her existing primary residence." HUD handbook 4155.1 4.b.2.c-d. Most underwriters use 50 miles as a reasonable commuting distance to use FHA again. 
• the cost for an FHA loan can be prohibitive. Upfront MIP is 1.75% and monthly MI is .85%. The Upfront is financed into the loan and the .85 never goes away regardless of the ltv, so it's a more expensive alternative to conventional.
• FHA does allow you to purchase units with the least amount of downpayment at 3.5%.

Hope that helps clarify

Stephanie