I found your blog on the web and thought you might be able to answer a question. I'm currently looking for a duplex or triplex to purchase. I intend to finance my new home with an FHA mortgage. I hope to live in the new home for 1 to 2 years, at which time I would search for a new single-family home. I intend to keep the duplex/triplex and rent out all units. What kind of implications does this have on finding a mortgage for the single-family home? Will a large down payment or high interest rate be required for the mortgage on my second home?
If the new single family home is an improvement in living conditions over the duplex you are living in now, then there will be no "Second Home" implications when it comes to higher rates. The Single Family will become your first home. Basically, the underwriter must be convinced that you really do intend to move into this new home.
You may have some income hurdles to cross when you get the new loan. You'll need to prove you can pay both loans. You'll be able to use the income generated from the other half of the duplex, but in most cases, you will not be able to use the potential income from renting the half you currently live in. Even if you have a renter signed to a new lease. You may end up needing to do a Stated Income style loan, then refinance it in a year or so, after you can document this additional income. If you do some research, you may come to the conclusion that Stated Income loans are a bad thing. But just because they are often misused, doesn't mean they are inherently bad. The honest reason for Stated Income loans is to help people how actually have the money to pay, but can't fully document where it is coming from. Future rental income would be a prime example.
The duplex will become an investment property. You current loan on the duplex will not change, but if you ever refinance it, you will then pay investment property interest rates on the new loan. Also, ask your loan officer if there is a minimum occupancy term on the loan for the duplex. If you plan to live in the duplex for more than a year, it shouldn't be a problem, but check anyway. In some cases, if you attain a "owner occupied" loan, then turn the property into a rental right away (usually a mater of months), the lender can come back and call the loan due.
Here's a question I got from a reader today.