New to Real Estate · Member since 2020 · 4 posts · 0 votes
Hey BP Community,
New investor in the Milwaukee area. I have been looking into duplex's In the area to house hack. I was looking at FHA loans to get a lower down payment, but understand you need to live in the residence for a year.
I am currently applying to a job out of state. Looking for information regarding an FHA loan if I were to move out of the residence in 3-4 months.
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
6y
@Jeb Vachuska - FHA loans are not the best product for what you are looking to do. Yes the downpayment can be as low as 3.5% and you may have bad credit, but almost every duplex worth buying in Milwaukee goes with multiple offers and FHA and VA loans are usually the first that go on the pile. Both come with a dreaded inspection which can become an issue often times just a week before closing potentially sending the deal into a tail spin. You are much more competitive with a "conventional" loan.
Second, they come with life long PMI, no matter the increase in value, you have to pay PMI as long as you keep the loan.
There are a few lenders who offer conventional loans with 5% down, some even without PMI. While sellers like strong buyers, as long as you fall into the category "conventional" it does not make a difference to a seller how much you put down.
Technically you are allowed to give up residence under one year, generally for circumstances outside of your control, like your job is asking you to move. Residence is generally defined as where your mail goes to. Lenders define loans in two categories NOO and OO - owner occupied and non-owner occupied; as long as you are OO they are willing to work with lower down payments. NOO is generally 25%, because you are more likely to mail in keys for a property that does not serve as your home.