These loans are NOT sold off as MBS, but are instead held on the balance sheet of the originating bank.I am not a banker, so my explanation may not be picture perfect, but that is a rough idea of how that world operates.As @Chris Martin mentions, the GSE underwriting looks at ALL mortgages you are involved with of any significance, so you could potentially choose to do a couple more Fannie deals before going ahead with the portfolio route, but you can't do it the other way around.  

I haven't done everything perfect and have made mistakes but I would much rather learn from those lessons early and grow. 

This is done in institutional lending every day, It is perfectly legal and banks and private lenders do it thousands of times every month across the USA.  

The forums are a perfect place to ask questions like this, and you'll usually receive lots of useful feedback.  

Market still holding at 150  a foot for 2 story and about 180 for ranchers... competition is Lennar  but I think we can beat them on quality of finish's and our lots are perfectly level theres are sloping. 

Now, if your goal is to buy one or few properties a year, this site is perfect for you and you'll learn also from your mistakes, right?

So do a refi as soon as you are allowed to under your purchase guidelines and get your 75K back for your next deal and take the additional 13K and add it to the rehab budget or down payment on another property or pay yourself a wage or whatever you want to do with it - that is your profit and you still own the house and (this is the important information in making this decision) rent it out ASSUMING that local rents are enough in the area for you to cover all expenses each month.That seems like the perfect situation considering you want to grow passive income and avoid a huge tax bill and the fact that you are in the middle of this thing as we speak.Lots of people are in envy of where you are right now in your investing Mr.

Up to 3% penalty if closed the loan out in less than 3 years.My questions...Is this a good strategy to get funds for flipping and what would be the best way to use the funds if my credit isn't perfect (over 700 though)?

Makes perfect sense.  

My husband and I recently purchased/are waiting to close on our first duplex (50/50 rule applies perfectly, making $600/mo profit or 300 each and we already have tenants lined up to move in).