PMI: FHA vs. Bank/ Credit Union

[Mark Carbonaro]

Hi there,

I'm looking to house hack a small multi-family property and am thinking of different financing options. I plan to occupy one unit of the residence for at least a year and rent out the other(s).

In looking to get a loan with an LTV > 80%, the two options I'm considering are:

-Get an FHA mortgage, put 3.5%-5% down, and refinance 12 months after closing to get rid of the monthly PMI expense.

-Get a non-FHA mortgage, pay the recurring PMI at first- knowing it will (hopefully) go away after I've built up 20-22%+ equity in the property.

Assuming consistent PMI costs and interest rates between options (before &/ after refi), the only scenario in which I can see the second option being more beneficial is if I had put enough money down to hit that 20-22% equity level within the first 12 months.

This seems implausible due to mortgage payments barely paying off any principle in the first year, not to mention I'd think the only way I could attain that level of equity so quickly is if I had put down 15%-18% initially, which virtually eliminates the benefits of a "low" down payment.

I don't have any specific properties, institutions, or rates in mind, and while I'm sure these questions would be more easily answered on a case-by-case basis, what are some considerations I may be overlooking? Any constructive input on this topic is greatly appreciated.

Thanks!

~Mark Carbonaro