FHA loan on house hacking duplex when own SFH w/conventional loan

[Daniel J Jackson]

We own our current home with a 15-year conventional loan. We have about 80k in equity (about 40% equity). We would like to move about 20 miles away (my wife was offered a job on the other side of town). We would like to house hack a duplex or fourplex. Can we buy using an FHA loan? Will 3.5% down be possible? A mortgage broker we are using is telling me a duplex must be 5% down for FHA and must be more than 100 miles from our current home. Is that right? Any and all advice appreciated. Thanks all!

[Zack Karp]

@Daniel J Jackson

You can do 3.5% down up to 4 units for FHA. The mortgage broker telling you 5% down is mistaken or their company has an overlay on the actual FHA guidelines.

In order to use rental income to offset the existing payment on your current residence (this is called a conversion of primary residence), FHA guidelines require that you are moving 100 miles away. That's just to use the rental income. If you qualify without needing that rental income, then you're good to go. If you need it, then you can't go FHA if you're only moving 20 miles away and keeping that home as a rental/investment property.

Conventional financing does not require this distance guideline on a conversion of primary, but for a 2-unit you'll need 15% down and for a 3-4 unit you'll need 25% down.

Hope that helps clarify.

Perhaps you could refi your current home and pull cash out for a down payment and go Conventional?  Just a thought...