How do people use FHA loans to buy multiple properties??

[Dylan Lineberger]

I constantly hear people online (Social media) talking about getting an FHA loan and house hacking a 1-4 Unit property. They say to move out after one year, find a tenant for the unit you were in, and buy another property to rinse and repeat. My question is how they are getting the second property using an FHA loan?? Can't you only have 1 FHA loan at a time. I've read that there are exceptions like moving 100 miles away or jobs etc. Do they just build up enough equity to refinance into a conventional loan in 1 yr?

[Ziad Hamati]

You would have to refinance if opportunity arises.

You can buy another property using FHA but it gets very tricky. Has to be 100 miles away. Generally, if your employer requests to relocate, then you can definitely do FHA. Or else, will be challenging.

[John Burke]

Quote from @Dylan Lineberger:

I constantly hear people online (Social media) talking about getting an FHA loan and house hacking a 1-4 Unit property. They say to move out after one year, find a tenant for the unit you were in, and buy another property to rinse and repeat. My question is how they are getting the second property using an FHA loan?? Can't you only have 1 FHA loan at a time. I've read that there are exceptions like moving 100 miles away or jobs etc. Do they just build up enough equity to refinance into a conventional loan in 1 yr?

FHA has caught on to this trend & updated the guidelines to prevent people from abusing FHA financing.
Here are the guidelines directly from the FHA Handbook:

Policy Exceptions Eligibility Requirements

Relocation:

A Borrower may be eligible to obtain another FHA insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:

• relocating or has relocated for an employment related reason; and

• establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

If the Borrower moves back to the original area, the Borrower is not required to live in the original house and may obtain a new FHA-insured Mortgage on a new Principal Residence, provided the relocation meets the two requirements above.

Increase in family size:

A Borrower may be eligible for another house with an FHA-insured Mortgage if the Borrower provides satisfactory evidence that:

• the Borrower has had an increase in legal dependents and the Property now fails to meet family needs; and

• the Loan-to-Value (LTV) ratio on the current Principal Residence is equal to or less than 75% or is paid down to that amount, based on the outstanding Mortgage balance and a current residential appraisal.

Vacating a jointly-owned Property:

A Borrower may be eligible for another FHA-insured Mortgage if the Borrower is vacating (with no intent to return) the Principal Residence which will remain occupied by an existing co-Borrower.

Non-occupying co-Borrower:

A non-occupying co-Borrower on an existing FHA insured Mortgage may qualify for another FHA-insured Mortgage on a new Property to be their own Principal Residence. A Borrower with an existing FHA-insured Mortgage on their own Principal Residence may qualify as a non-occupying co-Borrower on other FHA-insured Mortgages.

Rental Income from other real estate holdings may be considered Effective Income if the documentation requirements listed below are met.

If Rental Income is being derived from the Property being vacated by the Borrower, the Borrower must be relocating to an area more than 100 miles from the Borrower’s current Principal Residence.

The Mortgagee must obtain a lease agreement of at least one year’s duration after the Mortgage is closed and evidence of the payment of the security deposit or first month’s rent.

(b) Required Documentation

(i) Limited or No History of Rental Income Where the Borrower does not have a history of Rental Income for the Property since the previous tax filing, including Property being vacated by the Borrower, the Mortgagee must obtain an appraisal evidencing market rent and that the Borrower has at least 25% equity in the Property. The appraisal is not required to be completed by an FHA Roster Appraiser

You can use FHA to buy your first property and then go conventional on the rest.