Home Buying in 84501>Question Details

Amy Marx, Home Buyer in Price, UT

What are the regulations of converting an FHA loan to a conventional loan and then buying a second home FHA?

Asked by Amy Marx, Price, UT Fri Nov 6, 2009

Okay so long story short, we bought our first home with FHA and due to certain circumstances, had to move in with my parents. Instead of selling thehouse, we rented it out. We are now looking to buy a home for us that is on the market but in order to get the loan without having to pay 10% down, we would have to purchase it FHA! So this leaves us with having to refinance our rental home into conventional loan and then buying our second home with FHA right? Only problem is in order to qualify for this other home, we would have to count the rental income and unfortunaltely we did not claim this on our taxes! What can I do? We need to move out of my mom's house! I am going crazy living here but my husband will NOT sell our rental house? Are there any other options?

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I also found this on the FHA website. It says "Q. Can only a first time home buyer use the FHA loan program?
A. No. You can use FHA home loans as many times as you desire when buying a home or doing a mortgage refinance. The only guideline is that you cannot have more than one outstanding FHA mortgage loan with a loan to value of higher than 75%. You can own rental property and purchase your primary residence using FHA mortgage financing." Does this mean I would not have to refi my current home and I could actually have two FHA at once???
0 votes Thank Flag Link Sat Nov 7, 2009
Well, we actually do have more than 30% equity. We had the home appraised about a month ago so we are set there. We also have only been renting this house out since February 2009 so only this year, and we have not filed 2009 yet so can we count it when we file in January?
0 votes Thank Flag Link Sat Nov 7, 2009
Chances are, under the circumstance you describe, you will not be able to get a mortgage.

In virtually all cases, lenders are requiring a transcript of your tax returns from the IRS BEFORE settlement. If you are not reporting rental income, then it will be noted by the underwriter and your loan application will most likely be denied.

Further, if you do not have at least 30% equity in your rental property, then you will NOT be able to use the rental income to help qualify for the second home. You must be able to qualify for a new mortgage with BOTH mortgage payments. Additionally, as you already have an FHA Mortgage, you can not get another FHA mortgage unless you pay off the first one.

Most likely, your only options are: 1) sell the current home and buy another, or 2) keep the current home and rent.
0 votes Thank Flag Link Sat Nov 7, 2009
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