Refinance out of an existing FHA loan to get another FHA loan?

[Jon B.]

I was curious if the following scenario is possible (and legal of course)....

If I were to purchase a property using an FHA loan, live in the property for the required one year, then refinance out of the FHA loan into a conventional loan; would I then be able to then purchase another property using an FHA loan?

[Albert Bui]

Originally posted by @Remone R.:

Albert Bui I know it’s been awhile since a post has been made but I did have a question in response to your statement. If I have a fha owner occupied and my main goal is to purchase another property using fha as well. Without getting red flagged I should refinance as investment 70% ltv then I can use fha on the second property right away? And if so does that mean I would have to move out my current property to refi as an investment?

 Hi Remone,

Yes and No is your answer or the infamous "it depends."

You can apply for a second FHA loan if you meet the criteria to do so (the 4 exceptions to allow 2nd use of FHA loan concurrently) and the requirement for 25% equity to use rental income from your vacated primary (assuming you're leaving your current primary to purchase a new). If you have the equity, great, if not, then hopefully you have sufficient W2 or personal income to qualify both properties with out rental income (basically 25% equity in the vacated property is Req.'ed to use rental income).

Most people cant meet and jump through all the hoops above so they will refinance their current primary into conventional financing and free up the FHA eligiblity. Then wait 6+ months to apply for a new property after that (cant reapply under 6 months because you cant claim primary residence that soon twice aka mortgage fraud). The industry norm is a re-app for primary residence again 6+ months later, other banks will require 12+ months etc.

Strategy 2 is better since you get primary residence pricing however you do lose 6 months of market opportunity cost while you sit and wait. So there are always pro's and cons to everything.

The only advantage of refinance your current property as investment right now is it allows you to qualify as as primary right away with no wait period of 6+ months unlike option 2 above. 

The above has to be planned correctly with the right timing in order to ensure you maximimze on your opportunies. Id suggest getting a full purchasing power assessment (pre-approved) first so we know where you are right now given your income/credit/assets and how your scenario will look or will be considered once you complete your refinances to make sure we can advert any potential speed bumps that might up while you strive to reach your goals.

Hope that helps.