Home Buying in 60622>Question Details

Ajdepaul, Both Buyer and Seller in 60503

I have an FHA 5 Year ARM that adjusts in Jan. After Streamline can I rent it out. Does the 1 year rule apply to the new loan as well?

Asked by Ajdepaul, 60503 Wed Nov 17, 2010

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6
Aimee,

You are allowed to have more than one FHA loan at a time, under certain circumstances. These are, as follows, as referenced in the 4155 Handbook:

1. Relocation - . 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. Most lenders require 100 miles from the 1st FHA property.

2. Increase in Family Size - The borrower may be permitted to obtain another home with a 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 will have to prove it, and the 1st FHA property will have to be at a 75% LTV.

3. 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. This is usually seen in divorce cases.

4. A 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.

I hope that this helps!!!

Sincerely,

Dianne Y. Ayala Steffey, MBA, CLU, ChFC, NMLS#267658
Your Personal Mortgage Consultant for Life!
Sterling Mortgage Services NMLS#373771
2929 Mossrock, Ste 222
San Antonio, TX 78230
210.349.2102
210.349.1544 fax
210.831.8749 cell http://www.sterlingloans.biz
dianne@sterlingloans.biz
0 votes Thank Flag Link Wed Mar 9, 2011
Ajdepaul,

When you sign at closing, you are specifically stating that the property is going to be your primary residence. Under the FHA rule , you are required to live in your property for at least one year. On #5 of the Deed of Trust, it specifically states the following:

Borrower shall occupy, establish, and use the Property as Borrower’s principal residence within sixty days after the execution of this Security Instrument (or within sixty days of a later sale or transfer of the Property) and shall continue to occupy the Property as Borrower’s principal residence for at least one year after the date of occupancy, unless Lender determines this requirement will cause undue hardship for Borrower, or unless extenuating circumstances exist which are beyond Borrower’s control....
Borrower shall also be in default if Borrower, during the loan application process, gave materially false or inaccurate information or statements to Lender (or failed to provide Lender with any material information) in connection with the loan evidenced by the Note, including, but not limited to, representations concerning Borrower’s occupancy of the Property as a principal residence.

Ajdepaul, stupidity is a poor defense for the law. If your intent is to not live there after you refinance, I would think twice before refinancing if your intent it to rent it. However, after you've refinanced the house, and you are unable to make payments (extenuating circumstances), then you may be able to lease out the property. However, you will have to call the Lender to get this approved.

Do not take the advice that some have given here. Always do what is right.

All the best to you!!!

Sincerely,

Dianne Y. Ayala Steffey, MBA, CLU, ChFC, NMLS#267658
Your Personal Mortgage Consultant for Life!
Sterling Mortgage Services NMLS#373771
2929 Mossrock, Ste 222
San Antonio, TX 78230
210.349.2102
210.349.1544 fax
210.831.8749 cell
http://www.sterlingloans.biz
dianne@sterlingloans.biz
0 votes Thank Flag Link Wed Mar 9, 2011
You can rent it out. They never check on it.

Matt Laricy
Americorp Real Estate
Brokers Associate, e-PRO
mlaricy@americorpre.com
708-250-2696
0 votes Thank Flag Link Wed Nov 17, 2010
I am replying to my own post here...

So Aimee. We are open to purchasing with conventional that is not a problem. The issue is that we can't go conventional with our current principal residence as we are upside down on the note. We have to go FHA streamline or ride out the adjustments which i don't want to do. Ideally, I would like to go conventional on our house and purchase the next via FHA but with the LTV I don't believe that is an option. Have you guys seen any >100% LTV conventional loans lately??? We have more than adequate income and excellent credit.
0 votes Thank Flag Link Wed Nov 17, 2010
Good question! From a lender's perspective you are signing documents both at application and closing stating that this is an owner-occupied property and you intend to live there as your primary residence. If your personal circumstances change down the road that's understandable and you would have no issue renting the property.

Things to consider:
1. You can only have one FHA-insured loan at a time. So if you want to buy your next home with FHA-insured financing you should refinance your current home with a conventional mortgage. The FHA system is setup to easily track if someone has an existing FHA mortgage and would prevent you from obtaining another property with an FHA-insured loan, so that is something to consider as you decide whether or not to refinance with a streamline refi. I have definitely worked with clients to structure there financing in a way that they can maximize the FHA benefits.

2. Also on occasion (and especially if mortgage payments are missed) an FHA property can be checked to see if the owner lives there. Some lenders do quality control checks and see if utilities have been recently opened by the property owner for a different address. There are ways that people get caught using an FHA loan when it isn't the primary residence, BUT should you live in the property at time of closing renting the property in the future shouldn't be a problem.

Hope that helps shed some light on your options.
0 votes Thank Flag Link Wed Nov 17, 2010
Unless you are refinancing to another adjustable loan for which you will need yet another refinance, you can rent it out because FHA will not know that it's rented and will never check on it unless you stop paying. It's the same for a conventional loan. Life changes and while you currently have the intention of living in it as an owner occupant, circumstances can change and you may need to move elsewhere. You do not need to give details to the lender. It happens all the time.
My web site has some lender references including those that do FHA if you are shopping for the refi.
0 votes Thank Flag Link Wed Nov 17, 2010
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