Financing in Portland>Question Details

Hottyoo7, Home Owner in Portland, OR

Refinanced 6 months ago with FHA loan, signed a 12 month intent to occupy.

Asked by Hottyoo7, Portland, OR Wed Feb 23, 2011

Now our family is expanding and we have to move into a larger home. We have been approved for a 2nd loan on our 2nd home in which we will now occupy due to expansion, but what reprecusions will we face on our old FHA loan. What can they do to us if we try and sell or rent? Thanks

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Technically you are violating the terms of your refi and so the lender would have a right to "call" the loan - force you to refi the property or sell. That said, most likely you will be fine assuming the expansion of your family and the plan to move into your 2nd home was not your intent at the time of the refinance. Good luck and congratulations on the expanding family!
0 votes Thank Flag Link Thu Feb 24, 2011
It's all about the original application. If the reason you are moving out of your current residence is something you could not have foreseen when you originally closed your loan (job transfer etc) your lender and/or FHA shouldn't have an issue. FHA certainly wouldn't have an issue with you selling the home before 12 months is up.

The concern for FHA is when a consumer applies for credit and indicates it will be a primary residence when in fact the purpose of the purchase is to acquire a rental property. I don't see an occupancy issue from what you have described.

If you had purchased the property as a primary residence and kept the property as a rental property instead, that would be where you would run into trouble.

Good luck selling your home.
0 votes Thank Flag Link Thu Feb 24, 2011
It has been awhile since I have read that clause for FHA so I don't remember the exact phrasing of that disclosure. However if I remember the key word is "intend" meaning that at the time it was your intention to move into and use the home as your primary residence. VA loans are the same way, it only has to be your intention to move into the home. Since you were already living there I highly doubt it will ever be an issue.

Given the current number of foreclosures lenders are dealing with it would be really unlikely that they foreclose due to a change in occupancy. From a lenders perspective they are better off keeping a performing loan rather than foreclosing becuase of a change like that.
0 votes Thank Flag Link Thu Feb 24, 2011
FHA allows exceptions to the occupancy requirements for hardships and extenuating circumstances check with your current lender for their interpretation on your scenario. Also there is no prepay on government loans so you can sell without penalty at any time.

Best of luck.
0 votes Thank Flag Link Wed Feb 23, 2011
They could enforce the acceleration clause in your note. This means that the loan would be called due and payable if they find out you are no longer occupying the property. Read the form you signed and it should tell you what they would do. Email me if you have any further questions.
0 votes Thank Flag Link Wed Feb 23, 2011
Technically if you retain the property as a rental, you would be in default. However, I would be surprised if you got into trouble. If you really played by the rules, I guess you'd have to refi your home into a non owner occupied loan before closing on the new primary. Which would cost you lots of cash to get your LTV in line no doubt.

Its one of those things that you just do the best you can at the time. when you signed the FHA doc's your intentions were one way, and things change. Just be careful, and be completely truthful with both lenders at all times. Good luck.
Web Reference: http://www.pdxhomeloan.com
0 votes Thank Flag Link Wed Feb 23, 2011
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