Using FHA 203k for home/investment??

[Charity K.]

Hi. My husband and I are looking for some information about a few things. 1. Investment properties 2. Remodeling our home. The two tie in together because of financing but we have several questions about both scenarios.

First off, we purchased our home in 2006. My husband didn’t have the greatest of credit at the time so we had a first and a second, at horrible interest rates. We finally found a banker that allowed us to do a refi last year at a much lower rate and who also consolidated both loans. Closing costs were reasonable and we’ve been happy thus far.

Our current situation is one we’ve been battling for awhile. We’ve always wanted to add on to the space but always come up against the same old issue….equity and financing problems as a result. We’ve also always wanted to flip houses. We have a decent amount of experience with rehabbing properties and know we could do a really good job at it. My BIL is also a real estate agent and comes across great investment properties all the time.

Ok. So, we looked at the FHA 203k as an option for OUR house. Our issue comes from the fact that while I'm fairly sure we could get it, the PMI looks terrible. Does the PMI stay for the life of the loan? I've also read of people using the 203k and then once the property is completely renovated, they flip it into a conventional loan. Has anyone does this? I'm sure there are other things to be concerned about but one thing I worry about is closing costs for both loans. Surely those could get astronomical and may even mitigate flipping it into a conventional loan.

Next set of questions involves the investment properties. We had the idea that, well, if we could get a few investment properties done, we could fund the remodel on our home. But from my understanding, you can’t use the 203k for those. And without having equity in our home right now, and having not a lot of cash to devote to an investment property, there’s really no way we could get into something like that. Right? Does anyone have advice on how they’ve done this?

Next set of questions would be, let’s say we DO get the loan to do the remodel on our own house, and it’s either a 203k or it’s a conventional loan, or both. Once it’s done and we do have the equity in our place, being that we just got these loans underway, does it make it difficult or impossible to get a loan for an investment property. I mean, I guess I’m looking at this as, “how much of all of this is a bank going to put up with?”

I know we’d do well with investment properties. But having the start up funds is what’s holding us back. So, we’re trying to figure out how to do it all or at least portions of it….but I don’t want to cut our nose off despite our face and do something that’s going to hinder us from doing the next thing. Advice please????