Refinancing conventional loan to an FHA

[Raymond Bas]

Hello, I am a 25 year old looking to invest in his first multifamily property. My intention is to house hack. I live in South Texas in the Rio Grande Valley. Most of the current listings in my area are four-plexes that are fully occupied, usually listing for $320k-$390k with rent being from $600-$1100 depending on the quality of the apt and the location. I have a couple of questions that I would greatly appreciate some insight on:

1) If the numbers were to work and I purchase a fully rented four-plex with a conventional loan, can I later refinance it into an FHA loan if one of the tenants were to move out and I move in? Of course this would mean that I will still be paying my own rent ($600/month) at my current apt while the property is full rented.

2) With a conventional loan I am aware that the down payment will likely be higher up to 20%. From my studying, dropping nearly $70k for a property is not necessarily a good move, so what would be best in this situation? 

This is my first post on the bigger pockets forum and I am excited to hear from many of you. Thank you! 

[Joseph A Gonzales]

Hello, 

Depends on many things. You can buy the 4-plex with an FHA but you must live in the property. They can use 75% of the rental income from the 4-plex to add to your month income so it might help you get qualified. You can buy it with FHA live in it to save money until you find another property BUT while you have an FHA loan active you have to wait 3 years before you can use it again. If you refinance into a convention after you lived in the property for at least a year, you have to watch out what type of conventional loan you refi into because if you say it will be your primary resident you must and you will sign a paper staying you will live at the property for a year. If you buy the 4-plex use a qm conventional loan you will have to put 25% down not 20% unless you use an non-qm. If you use a non-qm loan you might be able to do 20% down. My recommendation is to buy it FHA live in it and fix it up so you can do a cash out refi later so you can buy another one in a year or two. You have to add value in order for this to work. I would also recommend becoming Pro and using the calculators to put it all together.

Let me know if you have any other questions.