Refinancing out of FHA after 1 year (house hack)

[Edgar Perez]

Hey BP,

I am looking into purchasing a $170,000 duplex using an FHA loan and house hacking. The duplex is a bank foreclosed REO and I think the asking price is about where the home is valued at. It is located in a nicer part of town, each unit has 3 bed 1.5 bath located on a corner lot. There is not a lot of work that needs to be done to the home, it had to undergo mold remediation but that part is done. Aside from some dry wall, minor flooring and kitchen update the place is solid.

I am pre-approved for the FHA so that is not a problem, my concern is on the Refi. Ideally I would like to cash out refi after a year to get rid of the PMI on the loan and pull out some cash but I am not sure how a refi works.

What do they base the refi off of?  

---I have excellent credit, and a decent savings (after the first year I estimate around 20k in savings) my W2 job brings in 3k a month gross and I think I can get a min rent of 1100 from one side of the rental, estimated monthly mortgage payment under FHA would be about $1000 (not including taxes and property insurance). Any info would be much appreciated. Thanks BP