Author Topic: Use 3.5% FHA for second home, or use HELOC to put down higher DP?  (Read 503 times)


  • 5 O'Clock Shadow
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Use 3.5% FHA for second home, or use HELOC to put down higher DP?
« on: September 19, 2018, 07:02:07 AM »
I own a 2 family home in the Bronx with finished basement that I bought with FHA 3.5% down in 2013, and have been house hacking, living in the basement, turning a nice profit and living for free. The goal is and has always been buying more properties.

I have done two things to facilitate buying the next house:

1. I refinanced out of the FHA so that I can get another FHA mortgage for 3.5% down, and found a lender who will let me use a 3.5% down FHA if the new property is an upgrade in size and/or quality and/or neighborhood from my current home. If it is a 3 family, it must be "self sufficient" per FHA guidelines.

2. I pulled out a HELOC loan on my first house that can cover a full down payment and closing costs.

Now, my question:

I found a 3 fam house in the Bronx that meets the criteria for the FHA 3.5% down. Cap rate is good. I won't be living for free, but when I move out after the year guideline it will turn a small profit.

Does it make sense to buy the house with the low 3.5% down payment to reserve cash for house #3 and to get my foot in the door for property #2, or does it make more sense to look for another house that turns a better profit off the bat, use the HELOC money, and wait for property #3. I assume there are a lot of variables here that may make this difficult to answer.