FHA Loan vs. 5% Down Conventional for House Hacking

[Megan Broom]

Hi everyone!

I am seeing that FHA has been commonly associated with house hacking. Is this simply for the lowest down payment possible? Would you still have to live in the property for a year with a 5% down conventional loan?

I am looking to sell my condo and put the bulk of the money into cash flowing rentals out of state and start house hacking in Atlanta. I will take all the advise anyone has to offer! :)

Thank you in advance!

Megan

[Account Closed]

@Megan Broom Hi Megan, I am currently in the process of purchasing a house hack in Norcross, GA. I was thinking of using FHA due to its low down payment requirement. However, after talking with my lender, I decided to go with conventional because of my excellent credit score that would allow me to save money on the PMI. I could have put down only 5% but I decided to put down 10% to save even more. With a conventional loan the amount of PMI charged is tiered and therefore the more you put down the less the PMI. Also with conventional loan the PMI goes away after you have 20% equity. With FHA it stays on the entire life of the loan, unless you refinance. Yes, you do have to live in and occupy the property for both FHA or conventional loans. FHA has a little bit stricter guidelines in terms of the property you can purchase. It needs to be move in ready and livable immediately. whereas if you were looking at properties that need a little bit of work/renovations then conventional would be your best option. I think ultimately it comes down to how much you have for a down payment. If you have the 5% to put down, I think conventional will be the best bet in the long run.