What type of mortgage should I get?

Question

I have a good down payment set aside ready for my first duplex investment property that I plan to rent out. I thought a FHA loan would be the best option but now I am second guessing my choice since interests rates might be higher. What loan would you think fits best in my situation? I have a great 800+ FICO and about 60K for a down payment.

Jacqueline Wright · Answer

Charlotte, with an 800+ credit score and $60K down, you have several financing options that could work better than FHA. Here’s a breakdown:

1. Conventional Loan (Best for Long-Term Savings) ✅

✔ Lower interest rates than FHA

✔ No upfront MIP (Mortgage Insurance Premium) like FHA

✔ 20% down avoids PMI, but you can go as low as 15% for investment properties

✔ Best for long-term hold & cash flow

2. FHA Loan (Best for House Hacking) 🏡

✔ 3.5% down option (keeps more cash for reserves)

✔ Must live in one unit for at least 1 year

✔ Mortgage insurance increases costs

✔ Good for maximizing leverage if you want to save cash for future investments

3. DSCR Loan (Best for Scaling Portfolio) 💰

✔ Approval based on rental income, not personal income

✔ Typically 20-25% down

✔ Higher rates, but no income verification

✔ Great if you want to buy more properties quickly

4. Portfolio Loan (If Planning Multiple Investments) 🔄

✔ Lenders consider future investments

✔ Can get flexible terms

✔ Good for long-term real estate investing goals

What’s Your Strategy?

📌 If you want to house hack: FHA makes sense

📌 If you want long-term savings & better rates: Conventional 20% down

📌 If you want to scale quickly: DSCR or Portfolio Loan

Paul De Luca · Answer

@Charlotte Wilson

If you will be occupying one of the units, I recommend 5% down conventional rather than FHA.

Jeremy Jareckyj · Answer

i would do a 5% down loan. FHA loans are really only best in lower credit and lower down payment situation. if you have the ability to do 5-10% I would do it.

if you don't need money for repairs , you could do on the higher end 10%+ but if you do need money for repairs 5% could be good.

some lenders will do recasts on loans and you cannot do recasts with FHA.

Daniel Baker · Answer

With your excellent 800+ credit score
and $60K down payment, you have multiple financing options. While an FHA loan (3.5% down) is often appealing for house hacking, it might not be the best choice for you due to higher interest rates and mortgage insurance (MIP) that lasts for the life of the loan.

Other Options:

• Conventional Loan (Best for      Long-Term Savings)
• Requires 15-25% down for a       duplex (but with $60K, you could still do 15%+).
• Lower interest rates than FHA.
• No mortgage insurance if you put       20% down.
• Higher loan limits for       multi-family properties.
• Conventional 5% Down Multi-Family      Loan (Fannie Mae)
• Allows you to buy a duplex with       just 5% down if you plan to live in one unit.
• Avoids FHA’s mortgage insurance.
• Might have slightly higher rates       but could save money long term.
• DSCR Loan (Debt-Service Coverage      Ratio)
• Best if you won’t be living in       the property.
• Approval is based on rental       income, not personal income.
• Requires 20-25% down but no       income verification.
• Higher interest rates than       conventional loans.
• VA Loan (If You’re a Veteran)
• 0% down with no PMI.
• Must live in one unit.
• Usually lower interest rates       than FHA or conventional.

• Requires 15-25% down for a       duplex (but with $60K, you could still do 15%+).
• Lower interest rates than FHA.
• No mortgage insurance if you put       20% down.
• Higher loan limits for       multi-family properties.

• Allows you to buy a duplex with       just 5% down if you plan to live in one unit.
• Avoids FHA’s mortgage insurance.
• Might have slightly higher rates       but could save money long term.

• Best if you won’t be living in       the property.
• Approval is based on rental       income, not personal income.
• Requires 20-25% down but no       income verification.
• Higher interest rates than       conventional loans.

• 0% down with no PMI.
• Must live in one unit.
• Usually lower interest rates       than FHA or conventional.

Recommendation Based on Your Situation

• If you plan to live in one unit,      a 5% down Fannie Mae loan or 15% down conventional loan is likely best.
• If you plan to rent out both      units, consider a conventional loan with 20% down to avoid PMI.
• If you prioritize cash flow, a DSCR      loan could be an option, though it comes with higher rates.

I hope this helps!

Nick Hiersche · Answer

Typically with a higher FICO profile you would lean towards conventional vs FHA, for the lower PMI and no up front MIP! Remember FHA has an additional 1.75% fee for UFMIP at closing on top of all other fees! Check our site for live rates for both updated hourly so you can compare!

Jack Matthias · Answer

Hi Charlotte,

I would do 5% down on a conventional loan if you plan on living in one of the units.

Jacob Sherman · Answer

Will you be living in the property ?

Derek Brickley · Answer

Hey Charlotte,

Saw your other post, but happy to respond to this too. I might be biased - though the easiest way to tell which option works best is to get a side-by-side comparison so you can see the overall costs, payments, etc.  When I did my first house hack, I used a 5% down conventional because I was in a similar situation to you.

As already mentioned, FHA mortgage insurance would most likely be higher for you than conventional, plus you have the upfront mortgage insurance that would be added to your total loan amount.  However, FHA rates will most likely be lower than conventional (but this can be a larger difference for different price ranges)

Conventional mortgage insurance drops off automatically at 78% loan-to-value (or you can request it dropped at 80% loan-to-value with an appraisal) whereas FHA it's on there for the life of the loan.  Since generally the benefit of a house hack is to hold the primary residence loan as long as possible, if you hold it long-term, you could still be forced to pay the mortgage insurance 10+ years down the line.

Plus, you can only have one FHA loan (with some exceptions) at a time, so I'd rather use this house hack for 5% down which I can repeat and save FHA for another time.  Hope that helps!

Patrick Roberts · Answer

If you're buying a true investment property (meaning you wont live in it), FHA is completely off the table and Conventional/DCSR will require 15%+ down. If you're househacking, Conventional is likely the best option for you and will only require 5% down on multifamily.

Like someone else mentioned, FHA loans are good in low credit and high DTI scenarios, but tend to be less bang for the buck compared against conventional. With a high credit score like yours, conventional will almost always be the better deal.

To be more granular, the note rate on FHA loans tends to be a little better than most other options given a set of loan variables. That being said, every FHA loan has UFMIP which is 1.75% of the loan amount, as well as monthly mortgage insurance pmts that are about 0.5% of the loan amount annually. To keep this simple, we can just say that this is the equivalent of adding 0.5% or 0.55% to the note rate. The mortgage insurance on FHA loans cannot be removed for at least 11 years without refinancing. All of this stuff will be dependent on the initial loan terms such as LTV.

Long story short, the simplest way to look at this is to add a 0.5% or 0.55% to your FHA rate and then compare that to a Conventional option (note rate + PMI rate) priced with 1.75 discount points.

Erik Estrada · Answer

Hi Charlotte,

FHA loans are for owner occupied properties only. The rates should also be lower compared to conventional or nonqm loans.

What is your objective in buying this property?

What type of mortgage should I get?

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