Financing a purchase with an FHA loan while currently in an FHA
Miami, FL · Member since 2017 · 2 posts · 0 votes
Financing a purchase with an FHA loan while currently in an FHA
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Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
9yAnsel you have many hurdles which I will list out:
1) first you have the self sufficiency rule from FHA which requires gross rents from all units (even the one you'd live in) X 75% must be higher than the monthly PITIA (principal, interest, taxes, insurance, assessments) this is only requred on 3-4 unit FHA properties
2) you need 3 months cash reserves to qualify for 3-4 unit properties
3) since you have an FHA loan already you'll need to have enough earned/qualifying income from your pay or other sources to qualify both FHA loans on top of qualifying for 1 of the 4 exceptions required by FHA below. You cannot use rental income on the new property to qualify unless your new FHA loan/property is 100+ miles away and you can document a min 25% or more equity in your current FHA property that you're vacating. This may make it difficult for many borrowers to qualify given the Debt to Income (DTI) ratios cannot exceed 46.99/56.99 unless you have a very high paying job or other income sources.
4) FHA has 4 exceptions to allow a borrower to have two outstanding FHA loans at one time which are: A) you cosigned on a FHA loan for someone else and now want to use FHA for yourself, B) you were legally separated or divorced and now want to use FHA to get your home but are tied on a current FHA loan with your ex-spouse, C) you've been relocated by your company to an area 100+ miles away and need to use FHA to purchase another home, or D) you can document your family size has grown significantly (mammogram or documentation for adoption, dependents, etc).
5) you can refinance your current FHA loan into conventional financing or other to free up your FHA so you wont be subject to #4 and #3 above
6) Even if you refinance out the FHA you'll have to deal with timing because you cant file "primary residence," multiple times within 6-12 months otherwise you will trigger mortgage fraud alerts. In the lender's minds were thinking "hey dude you just qualified for a primary home 4 months ago, what are you doing claiming another primary? Are you lieing to us?"
The above is what a good lender would be planning for you, anything less will put you in a world of headaches when dealing with multiple FHA loans, 3-4 unit FHA loans, and etc
Hope that helps.
5 Replies
- 9yMelvin ListBusiness MemberLender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
@Ansel Blanco The best way would be to move into one of the units if that is even an option.
- Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes9y
Ansel you have many hurdles which I will list out:
1) first you have the self sufficiency rule from FHA which requires gross rents from all units (even the one you'd live in) X 75% must be higher than the monthly PITIA (principal, interest, taxes, insurance, assessments) this is only requred on 3-4 unit FHA properties
2) you need 3 months cash reserves to qualify for 3-4 unit properties
3) since you have an FHA loan already you'll need to have enough earned/qualifying income from your pay or other sources to qualify both FHA loans on top of qualifying for 1 of the 4 exceptions required by FHA below. You cannot use rental income on the new property to qualify unless your new FHA loan/property is 100+ miles away and you can document a min 25% or more equity in your current FHA property that you're vacating. This may make it difficult for many borrowers to qualify given the Debt to Income (DTI) ratios cannot exceed 46.99/56.99 unless you have a very high paying job or other income sources.
4) FHA has 4 exceptions to allow a borrower to have two outstanding FHA loans at one time which are: A) you cosigned on a FHA loan for someone else and now want to use FHA for yourself, B) you were legally separated or divorced and now want to use FHA to get your home but are tied on a current FHA loan with your ex-spouse, C) you've been relocated by your company to an area 100+ miles away and need to use FHA to purchase another home, or D) you can document your family size has grown significantly (mammogram or documentation for adoption, dependents, etc).
5) you can refinance your current FHA loan into conventional financing or other to free up your FHA so you wont be subject to #4 and #3 above
6) Even if you refinance out the FHA you'll have to deal with timing because you cant file "primary residence," multiple times within 6-12 months otherwise you will trigger mortgage fraud alerts. In the lender's minds were thinking "hey dude you just qualified for a primary home 4 months ago, what are you doing claiming another primary? Are you lieing to us?"
The above is what a good lender would be planning for you, anything less will put you in a world of headaches when dealing with multiple FHA loans, 3-4 unit FHA loans, and etc
Hope that helps.
- Lender · Englewood, FL · Member since 2016 · 81 posts · 33 votes9y
@Ansel Blanco Your easiest strategy is to refinance your current property into a conventional loan. Fannie Mae allows up to 97% LTV on rate& term refi's. Then once done you can buy the triplex as an FHA, but will be required to live there. Hope this helps a little. Let me know if you have nay specific questions!
- Ontario, CA · Member since 2018 · 3 posts · 1 vote8y
@Jason Million and @Albert Bui If you refi from an FHA to a conventional loan, how soon after you refi can you qualify for a new FHA loan? Can this strategy work with an FHA 203K loan?
Thanks!
- Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes8y
Originally posted by @Justin Stewart:
@Jason Million and @Albert Bui If you refi from an FHA to a conventional loan, how soon after you refi can you qualify for a new FHA loan? Can this strategy work with an FHA 203K loan?
Thanks!
In theory right away in practical application min 6 months most cases especially if you funded the conventional loan as a primary residence (claimed). Claiming primary residence twice within the same calendar year is frowned upon.
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