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Can I, and Should I, Use an FHA Loan for Investment Purposes?
No. Well, maybe. Yes, if done a certain way. A loan insured by the Federal Housing Administration (FHA) is buyer-friendly, and it could be the ideal way for a relatively new investor to start their long-term path to wealth. First I’ll explain some of the benefits of an FHA loan, and then I’ll point out how to legitimately use it as an investor. Keep in mind that the FHA does not lend the money; a mortgage lender loans the money and is insured by FHA provided that the guidelines are met.
The typical FHA loan, known as an FHA 203(b) loan, involves a 3.5 percent down payment, and the entire down payment can be a gift from a family member. The minimum credit score for a 3.5 percent down payment is 580. People with a credit score between 500 and 579 could still qualify for an FHA loan if they put down 10 percent. The loan can be for the purchase of a one- to four-unit residential structure. Competitive interest rates and generally lower fees than many other types of mortgage loans. A person who filed Chapter 7 liquidation bankruptcy as little as two years prior could qualify for an FHA ... more
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