FHA refinance & rent out home - Does it make sense?

[Glenn Gomba]

Hello everyone, 

I'm trying to figure out what the best financial decision would be for refinancing / renting out our home and was hoping someone can help with some advice.

My wife and I are purchased a townhouse in Aug 2008 for 205k and have paid extra principle to get down to 149k remaining. The home is worth approximately ~170k with a conservative estimate based on nearby comps. The loan was an FHA 30-yr for 5.875%, of which we no longer pay mortgage insurance since we are now below 78% LTV.

I'd like to refinance to a new 30-year and rent the property out for 1.4k monthly on an ~1k mortgage (after refinancing) while the family and I rent out a nearby home for a similar price as our current mortgage of 1.4k, for about 2 years. This way we can remain flexible and continue to save money for the down payment on a future home. If we refinance with an streamline FHA loan will we be required to start paying Mortgage insurance protection again? (I heard all FHA loans now have MIP for the life of the loan). Will we be legally able to rent out the home if we go through this or have to wait for some timeframe? Does this all sound foolish? Thank you for any help you can give!