FHA Loan Details and Advice

[Alex Nelson]

Hey guys, newbie here. I've been doing my research and I'm positive that a househack is the way to go to for my first investment. I know I want to purchase a 4-plex on an FHA loan but I want to know what the real "catch" is here. I know with an FHA loan I will have to live in the home for at least a year, which is no problem. I also know that I'll only need to put down about 3.5% for the loan. My first question is: what other stipulations come along with an FHA loan? If i move out after a year, do i have to cover whatever the difference is from the 3.5% to the usual 20% or so of a conventional loan? are there other restrictions on the FHA loan that I should know about? (i'm already aware that you can only have 1 FHA at a time) what's the fine print that makes an FHA different from a conventional loan?

My other large concern is with budgeting. I understand that I can get a much larger house with only needing 3.5% down, however the repairs and upkeep are still going to be scaled to the larger size of the house. This means that I should set aside a significantly higher percent of my money for these compared to what i'm paying for a down payment. If i have a starting budget of $25,000, what would be a reasonable amount to set aside for the repairs/upkeep and still leave me enough to put the down payment and pay all the other costs associated with purchasing a property? My biggest fear is that I'll buy a 4-plex and then get dragged under by the expenses on a house of that size. I know I see house hacking praised as a great way to start, I just want to know how you guys navigate these expenses when starting this way with low investment capitol. I also have played with the idea of getting a turnkey 4-plex to start to avoid these expenses. Is it worth it to go this rout? Am I blowing my profits by buying a turnkey? have any of you had experience with turnkey vs "ugly fixer" properties? I just really want to avoid jumping in over my head!

[James Wise]

@Alex Nelson

No catch dawg. FHA loans are the VERY BEST loans you can get in the world. There is no better debt than FHA debt.

• My first question is: what other stipulations come along with an FHA loan? If i move out after a year, do i have to cover whatever the difference is from the 3.5% to the usual 20% or so of a conventional loan?

Nope. You don't have to touch the loan again.

• Are there other restrictions on the FHA loan that I should know about? (i'm already aware that you can only have 1 FHA at a time) what's the fine print that makes an FHA different from a conventional loan?

You have to pay PMI (private mortgage insurance) not really a big deal though. Pretty nominal sum of money.

• My other large concern is with budgeting. I understand that I can get a much larger house with only needing 3.5% down, however the repairs and upkeep are still going to be scaled to the larger size of the house. This means that I should set aside a significantly higher percent of my money for these compared to what i'm paying for a down payment. If i have a starting budget of $25,000, what would be a reasonable amount to set aside for the repairs/upkeep and still leave me enough to put the down payment and pay all the other costs associated with purchasing a property? My biggest fear is that I'll buy a 4-plex and then get dragged under by the expenses on a house of that size.

Bruh, you are overthinking. You have to live somewhere. Buy a house that's in decent condition and it shouldn't really go south on you. Home ownership is a cornerstone to building a larger net worth in this country.

•  I also have played with the idea of getting a turnkey 4-plex to start to avoid these expenses. Is it worth it to go this rout? Am I blowing my profits by buying a turnkey? have any of you had experience with turnkey vs "ugly fixer" properties? I just really want to avoid jumping in over my head!

Again you need to live somewhere and FHA debt is the best debt. Why pay 25% down and have no roof over your head as opposed to paying 3.5% down and having a place to live? 

As for fixer uppers? Why do you need to buy a fixer upper with your FHA loan? Buy a nice property with no issues.