FHA Loan + Cashout Refinance

[Jason Lin]

Hi Biggerpockets member,

I had a quick question relating to the FHA loan and cash out refinance...

Lets say I wanted to purchase a duplex using the FHA loan. From my understanding you cannot get a FHA loan if the property is distressed ? What if the property was just outdated (kitchen and bathroom) and I was able to rehab it and get it up to date thus forcing equity. Would I be able to do a cash out refinance from that property? Do I need to wait a seasoning period for it? Do I need to hit a 20% equity before I can refinance?

[Jason Lin]

Thanks for the quick response...that's exactly the information I was looking for. Would it be best to use a convention 5% down loan rather than a FHA loan? From my understanding I do qualify for a conventional as I don't have any DTI ratio since my car is paid off and I don't rent as I still live at home and my credit score is 700+.

Back to the FHA loan, if I did use that would the rates be higher after I refinance to a conventional loan? I'm not sure how refinancing works as I never purchase any properties before.