Refinancing an FHA to an investment property?

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      Can you please tell me if there are any flaws in the following scenerio? Anything I missed? I can not find much information about refinancing an FHA loan into an investment property loan. Would this work? Is there anything I am missing? Such as you can’t use a lump sum, or can’t refinance from FHA to investment, etc.


      + We purchased our townhouse at 150k 16 months ago.
      + Have made some minor & cosmetic improvements to it such as nicer paint, better flooring, appliance upgrades, etc. it presents MUCH better than before so I hope it would have slightly higher appraisal)
      + We bought using FHA. Home is legimately owner-occupied. I am just thinking ahead and really want a backyard soon.
      + Husband is on the title but income could not be used at the time due to lack of 2-yearjob history (he was a new immigrant at the time)

      THE PLAN

      + Refinance as investment property down to 75% loan to value – paying a lump sum of about $ 35,000 – $ 40,000 to help it get there if home value is still appraised at only 150k
      + Monthly payment (including taxes, PMI, etc.) would be reduced by about $ 200 a month. Is currently $ 1035.
      + PMI would go away then right? Reducing it by about another $ 50 a month?
      + Credit is not very good does this matter in a refinance?
      + Roll closing costs into the new loan
      + Rent to husband’s parents at $ 1200 which is slightly below FMV
      + Can use 85% as future rental income (no 2-year history needed for FHA) = $ 1020
      + Take a loss of about $ 93 per month (new mortgage including taxes of around $ 825 + insurance of $ 35 + HOA of $ 253) = 1113 and (expense 1168 – countable income 1020) = $ 93
      + Go out and qualify for a new FHA loan on a SFR to be owner-occupied for good
      + This time include my husband’s income assuming he then has a good 2-year work history

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