Walking away from an FHA loan
According to the Trulia reference on the issue, New York is a recourse state. Recourse means that the lender can go after you for the difference between the foreclosure discharge amount (in New York - the higher of the FMV or the actual sale price) and the debt balance. That includes garnishing your wages, seizing your assets, and any other method of collecting the judgement. The relevant law is in the New York Consolidated Laws - RPA Article 13. The option you're talking about is the option any lender has anywhere - not to sue you for the difference (provision 3 of the paragraph): If  no  motion  for  a deficiency judgment shall be made as herein   prescribed the proceeds of the sale regardless of amount shall be   deemed   to be in full satisfaction of the mortgage debt and no right   to  recover   any deficiency in any action or proceeding shall exist. So if during the foreclosure they didn't sue you for the difference - they cannot change their mind after that. If you're not sure you can repay the loan - you should probably walk away from the deal. Nearly every state in the US is full-recourse. If one doesn't seek bankruptcy protection, creditors can seek judgement, and collect assets. Foreclosures frequently sell for approximately half the market price. Considering unemployment risk, homes can be risky.  A far better way to accumulate wealth is with equities (stocks).  However, the risk converts from insolvency to liquidation since during times of high unemployment, equities are also cheap, causing any liquidation used to fund current expenses to be potentially ruinous. "One additional penalty is you will be put on the CAIVRS (""cavers"") for your default on the FHA mortgage which will preclude you from FHA financing in the future. When purchasing the multifamily unit it is an FHA requirement that you occupy one of the units.   Lastly, I would advise against FHA due to elevated costs.  Conventional options have 95% financing options, and don't have mortgage insurance that lasts forever, like FHA does."
I wouldn't like to say either way what you should do, not being an financial advisor or lawyer, but I did find an interesting article on nytimes.com: Walk Away From Your Mortgage!  that you might also find helpful to frame your decision. It has some interesting information on defaults, it says this: Mortgage holders do sign a promissory note, which is a promise to pay. But the contract explicitly details the penalty for nonpayment — surrender of the property. The borrower isn’t escaping the consequences; he is suffering them. In some states, lenders also have recourse to the borrowers’ unmortgaged assets, like their car and savings accounts. A study by the Federal Reserve Bank of Richmond found that defaults are lower in such states, apparently because lenders threaten the borrowers with judgments against their assets. But actual lawsuits are rare. And given that nearly a quarter of mortgages are underwater, and that 10 percent of mortgages are delinquent, White, of the University of Arizona, is surprised that more people haven’t walked. He thinks the desire to avoid shame is a factor, as are overblown fears of harm to credit ratings. Probably, homeowners also labor under a delusion that their homes will quickly return to value. White has argued that the government should stop perpetuating default “scare stories” and, indeed, should encourage borrowers to default when it’s in their economic interest. This would correct a prevailing imbalance: homeowners operate under a “powerful moral constraint” while lenders are busily trying to maximize profits. More important, it might get the system unstuck. If lenders feared an avalanche of strategic defaults, they would have an incentive to renegotiate loan terms. In theory, this could produce a wave of loan modifications — the very goal the Treasury has been pursuing to end the crisis. The loan you will just have to get by applying to a bunch of banks or hiring someone (a broker) to line up bank financing on your behalf for a point on the loan. FHA is for your first house that you live in and allows you to get 97.5% loan to cost financing. That isn't for investment properties. However, FHA loans do exist for multifamily properties under section 207/223F.   Your corporations should be SPEs so they don't affect each other. In the end, its up to you if you think it makes sense for all the single family homes to be in one portfolio. May make it easier to refi if you put all the properties in a cross collateralized pool for the bank to lend against. There is also no requirement for how long a corporation has been in existence for a loan. The loan has a claim on the property so it's pretty safe. So long as you haven't committed fraud before, they won't care about credit history. Awesome info, this is what I was looking for. I live in FL so i will look into LLC laws. Is there a difference in obtaining loans for multi-unit properties, or any special requirements? This would be my first purchase so I'm trying to decide if I should start with a multi-unit or a large home. I read something about a first time home buyers and the FHA allowing one to put down less of an initial investment. Im assuming this is if you are actually going to be living in the home or property?   Would it make sense to have separate entities for specific types of units? For example One separate corporation per multi-unit property, but have multiple single family homes under another single entity?   Thanks for the help.  *quick add-on, would you know how long the corporation would have had to exist before being able to obtain a loan? For example, would XYZ, LLC. have to have been around for 3 years prior to the loan, or could i just incorporate the month before going to the bank? Because they will make money? Trump is still rich as fuck, despite all this. He knows how to play the game, and he plays it very well. If I told you that I could go in with you on a company, and the company would fail and royally fuck anyone who loaned it money, but you would walk away with a cool million, would you do it? The only groups that should be weary of him are creditors, as they're the ones who end up with no chair when the music stops. Very few people's credit is worth $100,000. The average homeowner's credit (family of four with good to very good credit) is worth about $30,000. This is a pure business decision. The bank knew the law when they extended the mortgage to you, and part of the amount they're charging you goes to cover the risk that you might opt to walk away. The mortgage was an agreement between you and the bank and it specified the penalty for you walking away. Taking the agreed upon penalty for an action specifically contemplated in the agreement is also keeping the agreement. There are few different types of MI you can choose from, they are: Borrower-Paid Monthly (this is what most people think of when they think MI) Borrower-Paid Single Premium (you may have QM issues on this) Lender Paid Single Premium Split Up-front and Monthly The only way to determine which option will ultimately cost you less is to come up with a time estimate or range for how long you anticipate you will hold this mortgage, then look at each option over that time, and see where they fall. To answer your question about the single-premium being added to your loan, this typically does not happen (outside of FHA/VA).  The reason for that is you would now have 90%+ financing and fall into a new pricing bracket, if not being disqualified altogether.  What is far more typical is the use of premium pricing to pay this up-front premium.  Premium pricing is where you take a lender credit in exchange for an elevated rate; it is the exact opposite of paying points to buy down your rate. For example:  say a zero point rate is 4.25%, and you have monthly MI of say .8%.  Your effective rate would be 5.05%.  It may be possible to use premium pricing at an elevated rate of say 4.75% to pay your MI up front--now your effective rate is the note rate of 4.75%.  This is how a single premium can save you money.  Keep in mind though, the 4.75% will be your rate for the life of the loan, and in the other scenario, once the MI drops off, the effective rate will go back down from 5.05% to 4.25%.  This is why it is critical to know your estimated length of financing. The eligibilty of the deduction is based on what the borrowed money is used to purchase and NOT what asset is used as collateral.  So at the beginning of your mortgage, 10% of the interest is deductible because the entire loan was used to purchase the condo.  But when you withdraw money from the account the additional interest is usually not deductible.  It can get confusing with all the withdrawals and payments that will be coming in and out of the account if you happen to use it a lot like a chequing account. An easy example would be if you only paid the interest on the loan...  Say you had a $100 000 loan at 5% APY (for simplicity's sake).  After one year, you would have paid $5000 interest.  $500 of the would be deductible given that your office is 10% of the condo.  Then you buy a $1000 couch and continue to only pay interest for the next year.  You would have paid $5100 interest...  $5000 on money borrowed to buy the condo, and $100 on money borrowed to buy the couch.  So you can still only deduct $500. What happens when you pay back $500 against the line of credit?  Could you designate that 100% of the money should be applied to the non-deductible interest?  Or does it have to applied proportionally?  I don't know. I think it'd would be wise to separate the loans somehow.  Manulife may even have some tools to facilitate that.  However, I wouldn't recommend the Manulife One product.  I looked into when I was buying my house two years ago, and at that time it was too expensive.  The rate was the same that other banks were charging for a home equity line of credit (which was prime at the time).  You can replicate the Manulife One in a cheaper way using a traditional mortgage and a home equity line of credit...  The majority of the loan will be the traditional mortgage at (hopefully) a cheap rate.  Then you can use your line of credit as the chequing account. "Some of this may depend on how your employer chose to deal with your notice period.  Most employers employ you for the duration (which means you'd be covered for March on your insurance).  They could 'send you home' but pay you (in which case you're an employee for the duration still); or they could terminate you on your notice day, and give you effectively a severance equal to two weeks' pay.  That is what it sounds like they did. They should have made this clear to you when you left (on 2/23).  Assuming you work in an at-will state, there's nothing wrong (legally) with them doing it this way, although it is not something I believe is right morally.  Basically, they're trying to avoid some costs for your last two weeks (if they employ you through 3/6, they pay for another month of insurance, and some other things).  In exchange, you lose some insurance benefits and FSA benefits. Your FSA terminates the day you terminate employment (see this pdf for a good explanation of these issues).  This means that the FSA administrator is correct to reject expenses incurred after 2/23.  The FSA is in no way tied to your insurance plan; you can have one or the other or both.  You still can submit claims for expenses prior to 2/23 during your runout period, which is often 60 or 90 days. In the future, you will want to think ahead when leaving employment, and you may want to time when you give notice carefully to maximize your benefits in the event something like this happens again.  It's a shady business practice in my mind (to terminate you when you give notice), but it's not unknown. As far as the HSA/FSA, you aren't eligible to contribute to an HSA in a year you're also in an FSA, except that they use ""plan year"" in the language (so if your benefits period is 6/1/yy - 5/31/yy, that's the relevant 'year').  I'd be cautious about opening a HSA without advice from a tax professional, or at least a more knowledgeable person here."