FHA Loan without Rehab/Buying 1st Multi

[Douglas Eicher]

Hi BP'ers!

My wife and I are new investors and we've come across a unique question that we haven't yet been able to find the answer to on the forums.

The question:

If we house hack a duplex that doesn't need rehab'd and pay for it with an FHA loan with 3.5% down, what happens to the loan downpayment when we move in 1-2 years?

Example:

We buy duplex A for $100,000 with a 3.5% down FHA loan.

We live in the duplex for 1-2 years, then decide to buy another duplex, duplex B, using another FHA loan for 3.5% down.

Since we cannot have two FHA loans at one time, what happens to the loan on house A? Does it refinance into a new conventional loan? If so, do we have to come up with 20% down because it is no longer a primary residence?

This was a difficult question for us to answer because usually, investors use FHA loans on properties that need fixing up, which creates equity. Beings that this deal would not create equity because it doesn't need fixing up, we need to know what happens to the original FHA on duplex A.

Thanks everyone!

[Craig Curelop]

@Douglas Eicher - I am in the same exact situation as you. I purchased a brand new duplex for 3.5% down and I do plan to move and purchase a new one next year. 

Here is my plan.

Leave the FHA loan outstanding. Purchase the new duplex with a new owner-occupied 5% down conventional loan. There will still be PMI, but it will burn itself off. Once my duplex reaches 20% equity, then I will refinance out to a conventional.

Does that make sense?