Wow people.

Read the mortgagee letter:

Exceptions:

Rental income on the property being vacated, reduced by the appropriate vacancy factor as determined by the jurisdictional FHA Homeownership Center (see http://www.hud.gov/offices/hsg/sfh/ref/sfh2-21u.cfm) may be considered in the underwriting analysis under the following circumstances:

•Relocations: The homebuyer is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance. A properly executed lease agreement (i.e., a lease signed by the homebuyer and the lessee) of at least one year’s duration after the loan is closed is required. FHA recommends that underwriters also obtain evidence of the security deposit and/or evidence the first month’s rent was paid to the homeowner.

•Sufficient Equity in Vacated Property: The homebuyer has a loan-to-value ratio of 75 percent or less, as determined by either a current (no more than six months old) residential appraisal or by comparing the unpaid principal balance to the original sales price of the property. The appraisal, in addition to using forms Fannie Mae1004/Freddie Mac 70, may be an exterior-only appraisal using form Fannie Mae/Freddie Mac 2055, and for condominium units, form Fannie Mae1075/Freddie Mac 466.

These are 2 totally different exceptions.

So in Lisa's case the rental income can be used because it clearly falls under the relocation exception.

@ Ute,

I'm sorry you fell like anyone is over reacting. My intention was to defend my posts and position against the following comments made by Tom.

1) My company does not add their own guidelines either..... We use FHA's and our Investor's guidelines. And we have to adhere to this rule.

- This would lead one to believe that either I'm lying or I'm incompetent

2) If John has closed loans under these circumstances.... My hats off!!! But I wouldn't try it myself..

3) John Burke called these 'exceptions' as we read earlier. And believes that you must satisfy one or the other. My contention is that you should have to satisfy BOTH.

- I didn't call these exceptions - FHA did in the mortgagee letter that Tom posted the link to

4) If John Burke has an underwriter who will let this deal go through based on their interpretation.... Then Yay John and Yay Buyer.

- really?

5) The answer is 75% equity to use rental income per HUD.....!! This is NOT a lender guideline overlay.
So, even though someone can claim that they do not add their own guidelines..... You still have to know and understand HUD's guidelines.

- It's obvious that Tom is doing his very best to discredit me here.

His last post included these statements:

Looks like John finally was able to dig out some guidelines to fit your deal.

These guidelines from HUD are so poorly written that I am NOT SURPRISED that some broker could find a lender to do this deal.

- sure sounds like brokers are bad, doesn't it?

But when 90% of the lenders are going the other way..... It is only prudent for a professional lender to be 100% sure that the borrower is getting solid advice.

- apparently I'm not a professional lender.

While I do not endorse John.... It does seem to appear that he has done his homework on your deal.


All of these comments are clearly intended to discredit and disparage me so I feel that it's prudent to defend myself and my position when this forum is open for everyone and their mother to read.

In closing I would like to point out the fact that there were at least 3 other lenders that either posted in this thread or were mentioned in this thread that agreed with me.

I sincerely hope that you continue to post here after reading this post.

From Mortgagee Letter 2008-25

It is important to note that if the property being vacated had a mortgage insured by FHA, eligibility for a second FHA insured mortgage can only occur under the exemptions described in handbook HUD-4155.1 REV-5, paragraph 1-2.



From HUD-4155.1 REV-5 Paragraph 1-2

SECTION 1: OCCUPANCY STATUS
1-2 PRINCIPAL RESIDENCES. <TOP> A principal residence is a property that
will be occupied by the borrower for the majority of the calendar year. At least one
borrower must occupy the property and sign the security instrument and the
mortgage note for the property to be considered owner-occupied. 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.
To prevent circumvention of the restrictions on FHA-insured mortgages to investors,
we generally will not insure more than one mortgage for any borrower. Any person
individually or jointly owning a home covered by a mortgage insured by FHA in which
ownership is maintained may not purchase another principal residence with FHA
mortgage insurance except under the situations described below. Properties
previously acquired as investment properties are not subject to these restrictions.
We will not insure a mortgage if we conclude that the transaction was designed to
use FHA mortgage insurance as a vehicle for obtaining investment properties, even if
the property to be encumbered will be the only one owned using FHA mortgage
insurance. We do not object to homebuyers using FHA mortgage insurance more
than once if compatible with the homebuyer’s needs and resources as follows:

A. Relocations. If the borrower is relocating and re-establishing residency in
another area not within reasonable commuting distance from the current principal
residence, the borrower may obtain another mortgage using FHA insured financing
and is not required to sell the existing property covered by a FHA-insured mortgage.
The relocation need not be employer mandated to qualify for this exception. Further,
if the borrower returns to an area where he or she owns a property with an FHAinsured
mortgage, it is not required that the borrower re-establish primary residency
in that property in order to be eligible for another FHA insured mortgage.

B. Increase in Family Size. The borrower may be permitted to obtain another
home with an FHA-insured mortgage if the number of legal dependents increases to
the point that the present house no longer meets the family's needs. The borrower
must provide satisfactory evidence of the increase in dependents and the property’s
failure to meet the family's needs.

****The borrower also must pay down the outstanding mortgage balance on the present
property to a 75 percent or lower loan-to-value (LTV) ratio. *****A current residential
appraisal must be used to determine LTV compliance. Tax assessments, market
analysis by real estate brokers, etc., are not acceptable as proof of LTV compliance.


The *****'s are my edit.


It sounds like we are bogged down in semantics and interpretation. Reason #1 why lenders do not change their guidelines the day they get these letters.... because they are so poorly written.

With that said: From the Mortgagee Letter 2008-25
Rental income on the property being vacated, reduced by the appropriate vacancy factor as determined by the jurisdictional FHA Homeownership Center (see http://www.hud.gov/offices/hsg/sfh/ref/sfh2-21u.cfm) may be considered in the underwriting analysis under the following circumstances:

It looks like to me that you have to qualify based on BOTH circumstances.
And every lender I have discussed this with agrees with me.

I don't like to rain on people's parades Lisa. But I find it hard to believe that a lender could sell their loan on the open market without BOTH circumstances met.

If John has closed loans under these circumstances.... My hats off!!!
But I wouldn't try it myself....
I certainly wouldn't pay an application fee nor would I put down an earnest money deposit. I am afraid it would be lost.

I would HIGHLY RECOMMEND that you contact HUD directly. http://portal.hud.gov/hudportal/HUD?src=/contact
They are very helpful when it comes to interpreting the rules.


Tom Burris
Mortgage Banker
DallasLoanGuy.com
214-763-4629 cell/text/nights/weekends
tomburris@dallasloanguy.com

Ok, so we have two exceptions. Lisa won't qualify for the 25% equity exception and she might qualify if the current lease meets all the requirements set forth in the mortgage letter (e.g., minimum 1-year lease after closing of loan). So if she meets the requirements of this narrow exception, how much of the rent will they include as income to determine DTI ratio? Is it still just 75% of the total rent received? What may work in Lisa's advantage is that the relocation occurred in 2009, which to me indicates that it was not part of a scheme to just get out from under the mortgage. The next question is whether the current rental agreement with the tenant of the former principal residence will be for a minimum of 1-year after the closing of the new loan. There is light at the end of this tunnel and I would definitely recommend that Lisa work with a seasoned loan agent who can run this by the underwriter for the lender who would make the loan just to make sure that there are no unpleasant last minute surprises because the underwriter interprets Lisa's situation in an unfavorable light. It's one thing to have a theoretical exception, but it's another to get a loan based on the exception. I hope this works out for Lisa. Good info here.

Hi Tom. Thanks for setting the record straight and providing the link. I hope this helps Lisa making a decision.

Ute,

Great Question.

The answer is 75% equity to use rental income per HUD.....!! This is NOT a lender guideline overlay.
So, even though someone can claim that they do not add their own guidelines..... You still have to know and understand HUD's guidelines.

HUD addressed this issue in 2008 in MORTGAGEE LETTER 2008-25.
This HUD rule is known as the 'Buy & Bail Rule' amongst loan officers in the industry.

My company does not add their own guidelines either..... We use FHA's and our Investor's guidelines. And we have to adhere to this rule.


Tom Burris
Mortgage Banker
DallasLoanGuy.com
214-763-4629 cell/text/nights/weekends
tomburris@dallasloanguy.com

It appears that the posts are divided on the question of whether you will get credit for the rent. What's the real scoop? I don't think that the 25% equity requirement is just a lender overlay underwriting requirement. It was my understanding that FHA guidelines require that to count the rent at all (75% of it). John and other posters seem to suggest that rent will be counted as income regardless of the negative equity while Tom seems to agree with me. I can't be both ways. They either require that you have equity in the property or they don't. Which way is it?

Lisa,

1. Yes you can have 2 FHA loans. Generally 50+ miles away relocation is enough to be considered inconvenient per guidelines.
2. If you are counting on using the rental receipts to offset the other mortgage payment, you cannot. You would have to have 75% equity in the vacating property.

Tom Burris
Mortgage Banker
DallasLoanGuy.com
214-763-4629 cell/text/nights/weekends
tomburris@dallasloanguy.com

Hi Lisa,

Yes, FHA is an option and the guidelines will allow you to count the rental income regardless of equity position. The hard part is finding a lender (like me) that does not add their own requirements on top of FHA's requirements.

The Little Elm area does appear to be eligible for USDA financing so that could be an option for you as well.

http://www.usdamortgageonline.com

Thank you to everyone that gave their input and advice!

I do feel confident that I will find a lender that work with me and count my rental income. I've already found one in the area that seems to agree with John and his findings of the FHA guidelines.

I hope to update everyone with good news later on this year. Thanks again!

John,
I am not throwing anyone under the bus.
I simply stated that I am not surprised that some broker found a lender who will do the deal.

I am not a broker.... I am a Banker. We use guidelines from all of the major servicing banks.
To ensure that we have a salable product post closing, we make sure that we underwrite to at least 2.

I don't have 2 that interpret this deal the way your lender does.

This is not a lender guideline overlay issue.... It is an interpretation of the guidelines.

Hey.... if it funds.... Great!!

No need to overract. I don't think Tom's posts threw anybody under the bus or disparaged others. He expressed his opinion that caution was in order as the majority of lenders seem to go the other way. This post started out as a source of good information and the last post turned it more into a mudbath. I have contributed to Trulia for over 2 years and stopped doing so for a while because of this kind of conduct that can only contribute to an already unfavorable perception of our industry. Making the exchange on Trulia personal is not in the spirit of helping consumers. I came back to Trulia when things had cleaned up and perhaps I was mistaken. I will now no longer follow this thread as it has officially derailed. I hope Lisa will be able to buy a new home as she and her husband clearly are not the buy and bail type of people for whom the guidelines were intended.

Wow Tom,
Way to throw a professional peer under the bus. I didn't finally pull up some obscure lender's guidelines. I just had time to do it. Since you continued to bang you're own drum and disparage any one with a dissenting opinion I decided to back up my original post with the actual guidelines from one the largest wholesale lenders left.

Just because you work with a lender or two that interprets the guidelines to a conservative fault or adds the Fannie/Freddie overlay doesn't mean that anyone else who does not is some kind of slimy predator looking to take advantage of people.

Next you'll probably tell me that it's impossible to close a jumbo VA purchase with a 63% back end ratio.

Caveat Emptor Lisa

Looks like John finally was able to dig out some guidelines to fit your deal.

Remember.... Make SURE that you do not pay any fees up front and have a financing contingency in your contract.

These guidelines from HUD are so poorly written that I am NOT SURPRISED that some broker could find a lender to do this deal.

But when 90% of the lenders are going the other way..... It is only prudent for a professional lender to be 100% sure that the borrower is getting solid advice.

While I do not endorse John.... It does seem to appear that he has done his homework on your deal.

Good luck!!

Just for further clarification for Tom and others:

These are the guidelines straight from one of my investors:

FHA Product Guidelines

INCOME, CONT’D RENTAL INCOME
Converting Existing Homes to Rentals
 Single-family residences:

o Rental income from the borrower’s current primary residence is permitted,
provided at least one of the following FHA requirements is met:
• The borrower obtains new employment or a job transfer that is not within a
reasonable commuting distance of the current primary residence

or

• The borrower has a 25% equity position in the current primary residence
as evidenced by an appraisal or sales price within the most recent six
months
o If one or both of the requirements above are met, all of the following
documentation is required:
• Fully executed lease agreement (A 25% vacancy factor will be applied to
the lesser of the appraiser’s estimate of rent or the actual monthly rent
stated on the lease agreement) and
• Evidence of the borrower’s receipt of the security deposit and
• Evidence of the borrower’s deposit of the security deposit to his or her


Notice it says one of the following conditions and then further down it says or.

This also would apply for a borrower using a VA loan.

Lisa your first step should be to meet with a local and trusted mortgage broker, they are the only ones that can tell you what type of programs you may be able to quailify for. The minimum credit scores are higher for fha than most conventional loans. Anyone offering any advice is guessing until they see your income, expenses, credit score and other verification of employment. The guidlines you see on websites are just that, a guideline, you need real life answers from a real life loan officer.

Please see my blog for tips and advice on getting a mortgage in todays market

Thanks Elliot, I've been talking with a lender here that says I can do it, so I'll keep working with him and hopefully it all works out! Thanks!

Lisa, it's great that you have taken the time to research the HUD site but you need to talk to a lender. HUD/FHA sets guidelines but an approved lender will be able to tell you in simple English whether or not your situation will fit under the FHA program. Plus since lenders are funding the loan with their own money they may have additional requirements/overlays in addition to the requirements set by FHA. Those overlays can vary a little bit from one lender to another so you really need to get started with a lender that can analyze your income, credit and assets to determine if you can qualify for an FHA loan or not.

Please feel free to contact me for more details. Thank you.

Elliott R. Oliva
Mortgage Planner
NMLS #353884
Envoy Mortgage, LTD
512.825.8309 direct
eoliva@envoymtg.com

I just found this page that shows the relocation and equity and two seperate EXCEPTIONS - http://www.fhaoutreach.gov/FHAHandbook/prod/infomap.asp?addr…

Yeah this part is what throws me and what needs clarification -

This applies solely to a principal residence being vacated in favor of another principal residence **** and is not applicable to existing rental properties disclosed on the loan application and confirmed by tax returns (Schedule E of form IRS 1040).**** If the property being vacated had a mortgage insured by FHA, eligibility for a second FHA insured mortgage can only occur under the exemptions described in handbook HUD-4155.1 .

****Wouldn't my property be considered an existing rental property since it will be on Schedule E of form IRS 1040 on my 2010 tax returns? I believe that is what the lender was referring to.

And the mortgage is total price with taxes, insurance etc, (taxes $3200/yr, hazard insurance $64/mo)

Thanks for your insight Tom, I'm going to call so they can clarify for me.

So, if they don't count my rental income, what does my scenario look like for qualifying (hoping to qualify for $225k)

Income - $7500/mo
Debt - $610 (car payment and student loan)
Mortgage - $1360/mo (our renters pay $1200/mo)
Credit - mid 600's
Down Payment/Reserves Total - $17500

UNDER THE FOLLOWING CIRCUMSTANCES!!! <= Not 'exceptions'

It looks like to me that to count the rent that you have to have a Loan-To-Value of 75% or less.
This has been my opinion all along.... And why I suggested that you CALL them to see if you have to satisfy one or BOTH circumstances.

John Burke called these 'exceptions' as we read earlier. And believes that you must satisfy one or the other.
My contention is that you should have to satisfy BOTH.

So far:
We all agree and have established that you CAN have two FHA loans.... And we have established that you qualify based on job location.

We still do not agree on using the rent receipts to offset that vacated property's mortgage from your ratios(using rent income to offset mortgage).

Lisa, please call them with your specific situation.... I still contend that you need to have 25% equity(75% loan to value) in the vacated property to use rent.

Hey.... I have been wrong before. But I like to err on the side of caution when people are risking earnest monies and have their hopes and dreams on the line to.

Thanks Tom, this is the reply that I got from HUD:

Can I count rental income from an FHA financed home that I am vacating?

FAQ : Can I rent my current home and use the income to qualify for a new home using FHA?

Solution Details : Due to FHA?s concern that some homebuyers in these transactions may attempt to provide misleading information regarding the rental income of the property being vacated to qualify for the new mortgage, FHA is instituting underwriting guidance designed to assure that the homebuyer can make payments on the full debt service of both mortgages.
Beginning with case number assignments on or after September 19, 2008, and until further notice, the underwriting analysis may not consider any rental income from the property being vacated except under circumstances described below:

Rental income on the property being vacated, reduced by the appropriate vacancy factor as determined by the jurisdictional FHA Homeownership Center (see http://www.hud.gov/offices/hsg/sfh/ref/sfh2-21u.cfm) may be considered in the underwriting analysis under the following circumstances:

Relocations: The homebuyer is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance. A properly executed lease agreement (i.e., a lease signed by the homebuyer and the lessee) of at least one year?s duration after the loan is closed is required. FHA recommends that underwriters also obtain evidence of the security deposit and/or evidence the first month?s rent was paid to the homeowner;

Sufficient Equity in Vacated Property: The homebuyer has a loan-to-value ratio of 75 percent or less, as determined by either a current (no more than six months old) residential appraisal or by comparing the unpaid principal balance to the original sales price of the property. The appraisal, in addition to using forms Fannie Mae1004/Freddie Mac 70, may be an exterior-only appraisal using form Fannie Mae/Freddie Mac 2055, and for condominium units, form Fannie Mae1075/Freddie Mac 466.

This applies solely to a principal residence being vacated in favor of another principal residence and is not applicable to existing rental properties disclosed on the loan application and confirmed by tax returns (Schedule E of form IRS 1040). If the property being vacated had a mortgage insured by FHA, eligibility for a second FHA insured mortgage can only occur under the exemptions described in handbook HUD-4155.1 .

Handbook 4155.1: 4.E.4.a , 4.E.4.g, 4.E.4.h

FAQ : Can a person have more than one FHA loan?

Solution Details : To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable). Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below. Properties previously acquired as investment properties are not subject to these restrictions.

FHA will not insure a mortgage if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be encumbered will be the only one owned using FHA mortgage insurance.

We do not object to homebuyers using FHA mortgage insurance more than once if compatible with the homebuyer's needs and resources as follows:

A. Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by a FHA-insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage.

B. Increase in Family Size. The borrower may be permitted to obtain another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by rea

Good luck Lisa.

I still recommend that you contact HUD to be sure.

This is a very confusing guideline because it is poorly written and open to interpretation.
I would hate to see you risk earnest money...!!!

Tom Burris
Mortgage Banker
DallasLoanGuy.com
214-763-4629 cell/text/nights/weekends
tomburris@dallasloanguy.com

also....

The rental income will be calculated by your Schedule E from your Tax Return. We will count the whole mortgage payment against you, then give you credit for your rental income minus the expenses that are listed on your return such as taxes, insurance, etc…

This is an answer I got from a lender in the area -

Lisa,



You can have more than one FHA loan, and since your home in Austin has been rented since 2009 we will use the rental income that is documented in your 2010 and 2011 Tax Returns. The 75% rule is only used when a Tax Return is not available.



Thanks!

Actually, you CAN get straight answers ahead of time.
My underwriters are in my office.... Along with the closers and funders.
And if they do not know the answer.... We can always call the head underwriter or HUD(for example).

I don't bother them with every little question I answer on the internet.... I answer the ones I know and do not answer the rest.... I DO consult my staff for my clients though....!!!

Some things are just not straight forward enough to be answered by reading guidelines. Some things are open to interpretation.

If John Burke has an underwriter who will let this deal go through based on their interpretation.... Then Yay John and Yay Buyer.

Caveat Emptor

Yes, there is theory and then there is reality and unfortunately we can't always get straight answers ahead of time. Being able to sell the loan is an important factor and that's where the overlay underwriting guidelines come in as the originating lender will take the underwriting guidelines of the buyer of the loan into consideration when making the loan.

Hi Lisa,

That's right. You can count the rental income if you fall under one or the other.

Ah, so they are two totally different exceptions...so either relocation or equity will count your rental income. Thanks!

Thank you for all of your answers. If FHA doesn't count the rental income and since we don't have equity in our home, it looks like we will have to wait to sell our home and hope to break even before buying a new home. It's a disappoinment, but reality. Thank you!

http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi…


Ooops... here is a link to the Mortgage Letter 2008-25 that I left out of my last answer.


Tom Burris
Mortgage Banker
DallasLoanGuy.com
214-763-4629 cell/text/nights/weekends
tomburris@dallasloanguy.com

Hi Lisa,

Under the circumstances you describe it would appear that you should be able to obtain a second FHA loan. Speak with a local lender you trust and review your circumstances and get pre-approved. You should be fine but you want to make sure you will not have any issues once you find a house you would like to put an offer on.

Good luck to you.

Don Groff
REALTOR | Mortgage Broker
Keller Williams Realty | 360 Lending Group
512.669.5599
listings@dongroff.com

Hi, Lisa

Base on your information, especially if you can prove you've been renting a new home/apt/condo/ while renting out your old home, you should be fine for another FHA mortgage.

Hi Lisa. It's my understanding that rental income is not counted if you don't have sufficient equity in the home you are renting out. Since you mentioned you are under water, I don't think they'll count any of the rental income. I believe it was in 2009 that the lending industry instituted some new rules. To prevent the "Buy and Bail" phenomenon, you must have 30% equity (or 25% for FHA) in your current home in order to use the rental income to qualify for the new purchase. If you do not have the equity, you can still buy a new home, but you must have sufficient income to qualify making both payments without the benefit of the rental income offsetting the expense of the rental. Even if you had the required equity, they would still only give you credit for 75% of the actual rent amount you receive because they factor in a vacancy rate.

Lisa, in addition to FHA you may also qualify for a USDA No Money Down loan. The USDA program is a Rural Development loan that is utilized to provide families adequate housing in areas like little Elm. The program has been around 1994 but has only recently seen a resurgence.

Typical requirements are:

-620+ middle credit score
-No Down Payment
-No Mortgage Insurance
-No open collections, charge-offs, judgments or liens
-Home must be in a USDA eligible area which you can verify here:
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
-Not limited to first time home buyers

If you are renting your current home we may be able to use 75% of that rental income to offset your obligation on it during the pre-approval process. It's just a matter of reviewing your credit, income and assets to determine what you qualify for.

If you would like more information on these programs please free to contact me at your convenience. Thank you and Happy New Year!

Elliott R. Oliva
Mortgage Planner
NMLS#353884
Envoy Mortgage, LTD
512-825-8309 phone
eoliva@envoymtg.com

Consult with any qualified loan officer--also see link...
http://www.fha-home-loans.com/

Yes it is possible. I have actually looked into this myself for the same reason.They told me relocation is a reason for a second FHA loan. I contacted FHA and this is what they sent me...

Can a person have more than one FHA loan?

Solution Details : To prevent circumvention of the restrictions on FHA-insured mortgages to investors, FHA generally will not insure more than one mortgage for any borrower (transactions in which an existing FHA mortgage is paid off and another FHA mortgage is acquired are acceptable). Any person individually or jointly owning a home covered by a mortgage insured by FHA in which ownership is maintained may not purchase another principal residence with FHA mortgage insurance except under the situations described below. Properties previously acquired as investment properties are not subject to these restrictions.

FHA will not insure a mortgage if FHA concludes that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be encumbered will be the only one owned using FHA mortgage insurance.

We do not object to homebuyers using FHA mortgage insurance more than once if compatible with the homebuyer's needs and resources as follows:

A. Relocations. If the borrower is relocating and re-establishing residency in another area not within reasonable commuting distance from the current principal residence, the borrower may obtain another mortgage using FHA insured financing and is not required to sell the existing property covered by a FHA-insured mortgage. The relocation need not be employer mandated to qualify for this exception. Further, if the borrower returns to an area where he or she owns a property with an FHA-insured mortgage, it is not required that the borrower re-establish primary residency in that property in order to be eligible for another FHA insured mortgage.

B. Increase in Family Size. The borrower may be permitted to obtain another home with an FHA-insured mortgage if the number of legal dependents increases to the point that the present house no longer meets the family's needs. The borrower must provide satisfactory evidence of the increase in dependents and the property's failure to meet the family's needs. The borrower also must pay down the outstanding FHA mortgage (secondary liens do not need to be paid off or paid down) on the present property to a 75 percent or lower loan-to-value (LTV) ratio. A current residential appraisal must be used to determine LTV compliance. Tax assessments, market analyses by real estate brokers, etc., are not acceptable as proof of LTV compliance.

C. Vacating a Jointly Owned Property. If the borrower is vacating a residence that will remain occupied by a co-borrower, the borrower is permitted to obtain another FHA-insured mortgage. Acceptable situations include instances of divorce, after which the vacating ex-spouse will purchase a new home, or one of the co-borrowers will vacate the existing property.

D. Non-Occupying Co-Borrower. A non-occupying co-borrower on property being purchased with an FHA-insured mortgage as a principal residence by other family members may have a joint interest in that property as well as in a principal residence of their own with a FHA-insured mortgage. (See HUD Handbook 4155.1 for additional information). Under no circumstances may investors use the exceptions described above to circumvent FHA's ban on loans to private investors and acquire rental properties through purportedly purchasing "principal residences".

Considerations in determining the eligibility of a borrower for one of these exceptions are the length of time the previous property was owned by the borrower and the circumstances that compel the borrower to purchase another residence with an FHA-insured mortgage. In all other cases, the purchasing borrower either must pay off the FHA-insured mortgage on the previous residence or terminate ownership of that property before acquiring another FHA-insured mortgage.

FHA Handbook 4155.1: 4.B.2.c-d

Speak direct with a lender much more is involved than rendering a virtual response to your question.

YES rental income is either shown as + or - based on your tax returns. It depends on amount you pay for mortgage, insurance, taxes, repairs vs. the amount you are paid by the tenant

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
972-699-9111
http://www.lynn911.com

Sherry is right- you should contact a lender to see what you qualify for. There are so many loan programs out there that realtors cannot keep up with - best of luck to you.

Nanci

You really need to speak with a lender. It is my understanding that you cannot have two FHA loans.

David Romero
VP Sr. Loan Officer
ViewPoint Mortgage
North Dallas
13101 Preston Rd. #100
Dallas, TX 75240
Phone: 972-792-4289 Ext 8303 | Fax: 469-298-4948
Cell 214-912-5247
Email: david.romero@viewpointmortgage.com
Web: http://www.dromeroloans.com