2nd FHA Loan | House Hacking

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2nd FHA Loan | House Hacking

Emmanuel Barrientos
Member since 2022 · 1 post · 1 vote

I was wondering if there are any limitations to getting a 2nd FHA loan as far as what value the 2nd house is compared to the first one. In other words whether it is considered an upgrade or downgrade. I am in the process of learning and plan to use house hacking as my investing strategy for the first few properties. I know that I would have to refinance out of the first FHA loan in order to qualify for another FHA because you can't have two at a time. Let's say that my first house hack using FHA loan was bought for 220k and then once it is refinanced into conventional, I try for another FHA but this time it is a 175K property. Would this raise any flags? Thank you for any feedback!

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Matthew Kwan
Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes
2y

You can always start off on house hacking a multifamily in MI 1-4 units with min 5% down or 3.5% down for FHA. This will allow you to acquire more rental units and also being able to use the vacated unit rents at 75% to help your debt to income ratio DTI.
There is a FHA 100 mile rule if you do plan on using FHA on your 2nd house hack. The fha 100 mile rule will be triggered whenever you try to vacate your current primary and also trying to use the rental income to qualify.

However, this 100 mile rule can be exempted for the following rules

  1. Relocation
  2. Increase in family size
  3. Vacating a joint owned property
  4. Non-occupying co-borrower

If you are not trying to use FHA on your 2nd house hack, you can use conventional and the rules that I mentioned above will not be a concern and will be exempted.

@Carlos Valencia @Albert Bui

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  • Rick Albert
    Real Estate Agent · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
    2y

    It is my understanding that the purchase price won't matter. It is whatever you qualify for. 

    0Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    2y

    Distance from property to property could also be a factor.

    C2 Financial
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    0Reply
  • John BurkePro Member
    Lender · Temple, Texas/Nationwide · Member since 2024 · 85 posts · 24 votes
    2y
    Quote from @Emmanuel Barrientos:

    I was wondering if there are any limitations to getting a 2nd FHA loan as far as what value the 2nd house is compared to the first one. In other words whether it is considered an upgrade or downgrade. I am in the process of learning and plan to use house hacking as my investing strategy for the first few properties. I know that I would have to refinance out of the first FHA loan in order to qualify for another FHA because you can't have two at a time. Let's say that my first house hack using FHA loan was bought for 220k and then once it is refinanced into conventional, I try for another FHA but this time it is a 175K property. Would this raise any flags? Thank you for any feedback!

    This will be your bigger issue: 

    [email protected]720-371-1783
    0Reply
  • John Steffen
    Real Estate Agent · Dallas/Fort Worth, TX · Member since 2019 · 78 posts · 35 votes
    2y

    To land another FhA without refinancing, the 100mi distance is going to be the main requirement OR underwriters want to see a major life change (having kids so you need a bigger unit is the most common scenario). You may also want to consider a 3% down conventional loan on a SFH / SFH+ADU OR 5% down conventional on a 2-4 unit - this way you won't be restricted by your current FHA

    0Reply
  • Matthew Kwan
    Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes
    2y

    You can always start off on house hacking a multifamily in MI 1-4 units with min 5% down or 3.5% down for FHA. This will allow you to acquire more rental units and also being able to use the vacated unit rents at 75% to help your debt to income ratio DTI.
    There is a FHA 100 mile rule if you do plan on using FHA on your 2nd house hack. The fha 100 mile rule will be triggered whenever you try to vacate your current primary and also trying to use the rental income to qualify.

    However, this 100 mile rule can be exempted for the following rules

    1. Relocation
    2. Increase in family size
    3. Vacating a joint owned property
    4. Non-occupying co-borrower

    If you are not trying to use FHA on your 2nd house hack, you can use conventional and the rules that I mentioned above will not be a concern and will be exempted.

    @Carlos Valencia @Albert Bui

    2Reply
  • John BurkePro Member
    Lender · Temple, Texas/Nationwide · Member since 2024 · 85 posts · 24 votes
    2y
    Quote from @Emmanuel Barrientos:

    I was wondering if there are any limitations to getting a 2nd FHA loan as far as what value the 2nd house is compared to the first one. In other words whether it is considered an upgrade or downgrade. I am in the process of learning and plan to use house hacking as my investing strategy for the first few properties. I know that I would have to refinance out of the first FHA loan in order to qualify for another FHA because you can't have two at a time. Let's say that my first house hack using FHA loan was bought for 220k and then once it is refinanced into conventional, I try for another FHA but this time it is a 175K property. Would this raise any flags? Thank you for any feedback!

    People are confusing the exceptions for having 2 FHA loans at once with the FHA rule for counting rental income. There is no exception to this rule. If you need/want to count the rental income from your departing property, the new home has to be 100 or more miles away. Also, if you have limited or no history of rental income, you'll have to get an appraisal on the departing home to document you have at least 25% equity in the home.


    [email protected]720-371-1783
    1Reply
  • Brian Scott
    Member since 2024 · 15 posts · 8 votes
    2y

    Fanny Mae does have a 5% down owner occupied loan program for MF purchases.

    Any thoughts? 

    0Reply
  • Matthew Kwan
    Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes
    1y

    HI Emmanuel,

    You can always start off on house hacking a multifamily in MI 1-4 units with min 5% down or 3.5% down for FHA. This will allow you to acquire more rental units and also being able to use the vacated unit rents at 75% to help your debt to income ratio DTI.
    There is a FHA 100 mile rule if you do plan on using FHA on your 2nd house hack. The fha 100 mile rule will be triggered whenever you try to vacate your current primary and also trying to use the rental income to qualify.

    However, this 100 mile rule can be exempted for the following rules

    1. Relocation
    2. Increase in family size
    3. Vacating a joint owned property
    4. Non-occupying co-borrower

    If you are not trying to use FHA on your 2nd house hack, you can use conventional and the rules that I mentioned above will not be a concern and will be exempted.

    @Carlos Valencia @Albert Bui

    1Reply
  • Albert Bui
    Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes
    1y
    Quote from @Emmanuel Barrientos:

    I was wondering if there are any limitations to getting a 2nd FHA loan as far as what value the 2nd house is compared to the first one. In other words whether it is considered an upgrade or downgrade. I am in the process of learning and plan to use house hacking as my investing strategy for the first few properties. I know that I would have to refinance out of the first FHA loan in order to qualify for another FHA because you can't have two at a time. Let's say that my first house hack using FHA loan was bought for 220k and then once it is refinanced into conventional, I try for another FHA but this time it is a 175K property. Would this raise any flags? Thank you for any feedback!

    You can actually have another FHA loan at the same time and as @Matthew Kwan mentioned there are exceptions you need to meet to do so. If you'd like to get rid of these onerous rules to meet you can refinance out of your current FHA loan first yes.

    The other consideration is that if you move out of your primary to purchase a new FHA property you may also be subject to the 25% Equity requirement on the property you're vacating or leaving + the 100 mile rule that FHA has in place to stop rapid acquisitions. The intent of FHA was to promote primary residence home ownership not investing portfolio building so they put this rule into place.

    100 Mile rule basically says that you cannot use rental income offset from a lease agreement on your current house to help you qualify for the next property when using FHA loan to qualify.

    How do you get around this? YOu can use conventional financing or non VA financing options.

    The 25% equity requirement typically comes up when you're vacating a primary residence to buy another primary using FHA purchase. Its documented by a second appraisal ordered on the property you're leaving or vacating to document value and your current equity in this property. Its to make sure you have enough skin in the game on this property such that when you buy the next one you're not going to be in over your ski's.

    Hope that helps, there are many ways to structure your situation so that you can bob and weave around these obstacles.

    @Matthew Kwan

    @Carlos Valencia

    0Reply
  • John BurkePro Member
    Lender · Temple, Texas/Nationwide · Member since 2024 · 85 posts · 24 votes
    1y
    Quote from @Matthew Kwan:

    HI Emmanuel,

    You can always start off on house hacking a multifamily in MI 1-4 units with min 5% down or 3.5% down for FHA. This will allow you to acquire more rental units and also being able to use the vacated unit rents at 75% to help your debt to income ratio DTI.
    There is a FHA 100 mile rule if you do plan on using FHA on your 2nd house hack. The fha 100 mile rule will be triggered whenever you try to vacate your current primary and also trying to use the rental income to qualify.

    However, this 100 mile rule can be exempted for the following rules

    1. Relocation
    2. Increase in family size
    3. Vacating a joint owned property
    4. Non-occupying co-borrower

    If you are not trying to use FHA on your 2nd house hack, you can use conventional and the rules that I mentioned above will not be a concern and will be exempted.

    @Carlos Valencia @Albert Bui



    Matthew,
    You are confusing the exceptions for having 2 FHA loans at once with the FHA rule for counting rental income. There is no exception to this rule. If you need/want to count the rental income from your departing property, the new home has to be 100 or more miles away. Also, if you have limited or no history of rental income, you'll have to get an appraisal on the departing home to document you have at least 25% equity in the home.




    [email protected]720-371-1783
    0Reply
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