good afternoon..first of all..i don't know what your interest rate is, but you can do a streamline fha refi....i have lenders that don't require, income documentation, appraisals, or some even credit reports.....you can get the refi done, regardless of value assuming the payments have been made on time as you have stated.....it is very unfair that the condo assoc. has the ability to hold owners captive in their own homes......but they do.the only other possiblity is to have someone assume your fha loan.they are assumable, but the buyer has to qualify.......the only other option is to join other homeowners and see if you can get the rental issue in the condo bylaws rewritten..selling it on a land contract may work around the issue of renting, but it does violate the due on sale clause in your mortgage..best of luck..bob mcclure- success mortgage partners- plymouth, michigan.....

I am in the EXACT same position that you are in, however, I have a couple of different issues. I claimed the tax credit for my first time home purchase. I was married when I got my loan and in the process of a divorce. I was ill advised and was told to apply as single at the time since he and I were going through the divorce. My husband works for the gas company and installed the new furnace I was putting in the house. All that "quality time" we spent together actually helped us reconcile some of our differences. I was too far into the purchase process to back out of contract, and by reconciling my marriage (with a baby on the way) that would make a family of 5. The home I was purchasing was only a two bedroom for the baby and our 4year old daughter to share a room. I was stuck from the get go.
I am going through the SAME issues with the cant sell - if i did i wouldnt sell for enough to cover the loan and i would have to repay the Tax Credit i received out of pocket. plus Pay for a realtor and repay a 1200 gran i received for assistance. I cant refi since I was 100% financed. My taxes would go up at a non owner occupied rate and my ins premium would increase and I wouldnt then be able to rent the home for what the new payment would be. i am stuck. I dont want to continue to look over my shoulder but what other choice am i left with.

I could follow the advice listed, but they would probably require documentation including the marriage certificate which would be before my home purchase. I could supply them with the dissolution of marriage notice we filed, but it is not a legal separation and I am afraid they would require accelleration of debt because I furnished false information (which was not my intention) circumstances change. WHat should I do?

Oh and if I just dont notify my lender I am renting out the house but my insurance company writes my policy as owner occupied, does that throw up a red flag?

Extra answer:

I can only speak generally without reviewing your Mortgage and Note, but based on past experience with clients who've been through a similar situation, I'd offer the following:

1.) FHA won't demand an acceleration of the Note unless there is reason to believe that you have not or have never intended to occupy the property. Your lender is responsible to FHA to guarantee the property is owner occupied at the outset of the loan... but changing occupancy later becomes a servicing issue rather than an origination issue. I am less familiar with servicing issues than origination, but the prinicpals in general are common between servicing and origination.

2.) Your lender's responses seem contradictory (more of a CYA response than a helpful response), but essentially the answer is that the lender won't bother to investigate as long as payments are made on time and there is no reason to believe that you were untuthful in your original intent to occupy.

Should the lender question your actions, the truth as you've outlined in your post should be a satisfactory explanation. If you were to apply for a new FHA insured loan, it sounds as if you would have two exceptions to the "one loan per customer rule": (A) Your family size has increase due to marriage and (B) You have relocated to accommodate your wife's employment (FHA does not require the employer to mandate relocation; it's up to the borrower(s) ). The increase in family size exception is a concrete fact; the relocation exception is subject to interpretation of "not within reasonable commuting distance from the current principal residence" (direct quote from HUD's FHA manual).

The reason why I use the exceptions is that should you be questioned by the lender, those exceptions for eligility for a second FHA insured loan provide a basis to support your argument that you aren't acting in bad faith in converting your current principal residence to a rental property.

3.) Further, FHA has a specific guideline to define satisfaction of the owner occupancy requirement:
"Our security instruments require a borrower to establish bona fide occupancy in the home as the borrower's principal residence within 60 days after signing the security instrument with continued occupancy for at least one year."

You've occupied your dwelling long enough to satisfy FHA; your lender should be satisfied as well.

If you're interested in reading the FHA guideliens yourself, here is the link to HUD's FHA manual covering the relevant items:

http://www.hud.gov/offices/adm/hudclips/handbooks/hsgh/4155.…

Shoudl your lender question your actions, a letter of explanation that you've married and moved in with your bride to be closer to her employment should be more than satsifactory. Again the ledner is concerned about their obligation to HUD to underwrite "truthful" loans; you've satsified FHA's requirement and can easily document your reasons to convert your residence to a rental.

By the way, this is a excellent question; thanks for the chnace to answer.

Additional details from original poster:

Thanks for your responses. We won't need another FHA loan, so I am not concerned with that. I am concerned with the promise to occupy. I've even spoken with the lender, and they so much as said that they "wouldn't get involved unless they found out," but if they did, "they may accelerate the loan." So they are basically admitting to me that they look the other way, but what would allow them to "find out?" If they see I've changed my address, wouldn't that tell them? Wouldn't I need to change my homeowner's insurance? If so, wouldn't that alert the lender since they pay my insurance through the escrow account?

Lender answer:

I am unaware on a clause in an FHA insured mortgage which would prevent you from renting out your home. Such a clause suggests to me (a non-lawyer) that it would interfere with your "quiet enjoyment" rights of your estate.

You may be thinking of the Affadavit of Occupancy you signed at closing in which you promise to occupy the home (FHA residential loans are always owner occupied), and/or you may be thinking of the HUD prohibition for one borrower to hold two or more FHA insured mortgages at one time.

First, the Affadavit of Occupancy is a document securing the premise of the loan - that you will occupy upon closing. It is not a blanket prohibition on changing your mind later should you wish to buy another home and retain your current dwelling and FHA insured mortgage.

Second, FHA provides for 9 exceptions to the "one loan per customer" rule. An increase of family size is one exception (getting married CERTAINLY qualifies as increased family size- Congrats!), which means should you and your wife decide to buy another home in the future, you would be eligible for a second FHA insured loan on your new dweliing under the family-increase exception.

There is no problem with moving out of your home, renting it, and retaining your FHA insured loan. Make sure your lender has your new address, continue to make your payments on time, and relax.