FHA Mortagae/Alternatives

[Eric Casey]

Hi All,

For my first property I would like to take advantage of a FHA mortgage to use the low down payment option and a buy multi family to house hack. My issue is that I am locked into 9 more months of a rental lease, so moving into a new place is not feasible for that amount of time. Would anyone have any opinions on me buying something like a sfh to rent out in the meantime, if so, are there are any alternative options to the FHA for the low down payment? Or would it be more financially wise to wait the 9 or so months to move into a house hack situation?

[Dave Van Horn]

Hi @Eric Casey

You could buy a SFR with a conventional mortgage for a rental, but it's usually going to require a significant down payment (i.e. 20-30% down) and having this additional mortgage could mess with your debt-to-income ratio when applying for the FHA loan. Your only other option to get a lower rate when purchasing a SFR with traditional financing would be as an owner occupant. This may also impact your FHA loan application - mainly because lenders usually like to see home-buyers moving up rather than down. So it probably wouldn't make much sense to the lender if you went from where you live now to a SFR home then to a single unit in a multi-unit property. Believe it or not, this story of your move is important to the FHA financing process than many people think.

I would talk to a lender and get there suggestions. It sounds like it may be worth waiting the 9 months.

I'd also suggest thinking about non-traditional financing to acquire properties or income. So for instance, if you want to make money in Real Estate in this 9 month period you could do a quick flip or wholesale a deal. And if you wanted to get a lot of the same benefits of owning a rental, you could do a lease option deal. Or if you wanted to still acquire property to rent out, you could acquire a property subject-to someone else's mortgage (basically walking into their mortgage) or JV with someone.

Hope this helps.

Best of luck.

- Dave