Questions about getting an FHA loan

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Questions about getting an FHA loan

Christian B.
Coram, NY · Member since 2019 · 14 posts · 5 votes

I am a newbie to real estate and I want to get started this year. I want to try house hacking and using an FHA loan. I want to invest in Long Island, NY, but the prices are so high with most houses above $200,000.

I want to use an FHA loan to get started because of it's low down payment requirement.

I learned that I need to have stable employment for at least 2 years, which I will reach this year. Will I be less likely to qualify because I just reached 2 years?

My credit score is 786 and 791 according to Credit Karma so I hope that works in my favor. I don't make a lot of money but I have a relative who makes more money than I do who is willing to help pay for the down payment and help pay for the mortgage for when we don't have tenants or when the rent doesn't cover the mortgage.

I suppose she will be like my investor. She is interested in using real estate for supplemental income. She doesn't show interest in finding the properties but she has money. I will do the work in finding and buying properties; fixing up the properties; filling the properties; and working and communicating with everyone in the real estate business.

I assume my low annual income will reduce my chances for getting the loan. Can I add my relative to the loan or let the lender know that I want the loan in my name but my relative will help with the down payment and mortgage payments? My relative just finished college and will not have been employed for a year when I do reach 2 years of steady employment. Will that affect my chances of getting a loan?

I would also like to know if it is worth it to use the FHA loan and have the mortgage insurance or to instead try to reach the 20% down payment.

Does the mortgage insurance count towards paying off the loan?

I don't see where I can add the mortgage insurance in the Rental Property Calculator, can someone show me where it is?

Is there a way to compare the same rental property with different scenarios: one with a 3.5% down payment and mortgage insurance, and the other with a 20% down payment and no mortgage insurance?

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  • Paul DefnginPro Member
    Lender · Rockville, MD · Member since 2008 · 498 posts · 199 votes
    6y

    Hi @Christian B.. Great job exploring your options and I wish you success in your journey. 

    Now to address some of your questions. One using FHA is for primary home only, not for investment. Want to make sure that you make the distinction here. That said, if you find a duplex, tri-plex, or a 4 unit property, that is different as it is required that live in one of the unit and you can rent out the other(s).

    "... who makes more money than I do who is willing to help pay for the down payment and help pay for the mortgage for when we don't have tenants or when the rent doesn't cover the mortgage" This is allowed with some caveats. FHA definition of a family member is defined as follows, regardless of actual or perceived sexual orientation, gender identity, or legal marital status:
    • child, parent, or grandparent;
    o a child is defined as a son, stepson, daughter, or stepdaughter;
    o a parent or grandparent includes a step-parent/grandparent or foster
    parent/grandparent;
    • spouse or domestic partner;
    • legally adopted son or daughter, including a child who is placed with the Borrower by an
    authorized agency for legal adoption;
    • foster child;
    • brother, stepbrother;
    • sister, stepsister;
    • uncle;
    • aunt; or
    • son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law
    of the Borrower

    Two that relative is equally obligated with you on that loan. So, if you can’t pay, she is expected to pay as the joint co-signor whether she occupies or not occupy the home with you. 

    Three, you don't need to have two year history of work. If you were in school prior and you now have worked at current job, you should be able to qualify for an FHA loan. If you are salary and not hourly paid, you could buy as soon as you have the job. If you're paid hourly or other than salary then you want to establish job history as your income is considered variable income.

    Hope that this helps a bit and it answered some of your questions. 

    Good luck with your new journey. 

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  • Christian B.
    OP
    Coram, NY · Member since 2019 · 14 posts · 5 votes
    6y

    So if I am the borrower I have to live in the house and if she is the co-signor she doesn't have to?  Am I reading this correctly?  If she were the borrower then she has to live in the house and if I am the co-signor I don't have to live in the house?

    Also thank you for answering some of my questions, they really helped me a lot.

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  • Michael Carbonare
    Investor · Fort Lauderdale, FL · Member since 2013 · 919 posts · 607 votes
    6y

    You can find much information on the FHA website. 

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