FHA loans are great for buyers with a smaller down payment, less than perfect credit, a bankruptcy in the last 7 years, modest income, or buying a 2–4-unit home. However, an FHA loan may not be an option for many looking to add to their real estate portfolios, especially those looking to utilize the popular BRRRR method (Buy, Rehab, Rent, Refinance, Repeat).
The FHA’s 100 Mile Rule restricts obtaining a new home with an FHA loan while converting your current residence into an investment property. The requirement states that a new primary residence must be 100 miles away from the old departure residence. So, if you plan to purchase a new home in your neighborhood or a nearby community, you will not qualify for an FHA loan and will need to look at other options, like a conventional loan. But, if you are moving more than 100 miles away to a new town or state for a job transfer or other reasons, FHA can still be a great option and allow you to keep and rent your current home.
Be sure to work with a knowledgeable and professional lender so you can be pre-approved correctly and avoid risking thousands of dollars of earnest money.
And that’s how you Leverage Smarter.
