First of all, I would read the actual mortgage document itself. This will spell out their agreement with the bank exactly.
Secondly, unless something has changed recently. All FHA loans require an owner to occupy the property for 12 months unless some type of emergency (like death, divorce, job transfer) occurs. The loan should be assumable with qualifying. The property could be sold and the mortgage paid off, but your client probably would take a loss, and there may be a prepayment penalty.
FHA HOME LOAN, CAN THE OWNERS LEASE THIS PROPERTY?
I’m in the process of working with new home owners that want out of the house. The owners have excellant credit and have already be approved for a FHA loan. After buying this house they don’t like it and are trying to find a way out. This a a very new loan (2 weeks)
Any suggestions on how I could help these people out. What are the stipulation on a FHA loan as far as being owner occupant? Could this house be leased out? These people are very motivated to sell or lease a.s.a.p.
Re: FHA HOME LOAN, CAN THE OWNERS LEASE THIS PROPERTY? - Posted by Hugh James
Posted by Hugh James on June 16, 1999 at 20:28:17:
As they say, there’s good news and bad news…I’m a mortgage broker, and probably 70% of my business is FHA. Every FHA direct endorsement lender I’ve ever known is very clear about the terms–owner occupied only, one FHA loan to a customer. “Owner occupied” means you fully intend to occupy the premises as your personal residence for one year from the date of closing. Lawyers (especially new ones) occasionally like to roam off into long winded considerations as to “state of mind” and what constitutes and “emergency” but the reality is that HUD lenders have very deep pockets, and if they say you have a problem, well, you’ve got a problem. The reality is that borrowers do this all the time. They say they’ll occupy, and then don’t live up to the deal. It’s also true that, unless you’re in default, or close to it, you probably won’t ever be bothered. But, I sold my own house in March. The buyer took out a new FHA mortgage. Within 6 weeks every single person connected with that loan – broker, borrower, givers of gift money, etc. – had been contacted by phone or mail in what they now call a “quality control” audit. I hate to think what would have happened if the borrower didn’t live there, and the mail addressed to him was returned to HUD’s auditors “addressee unknown.” I guess you go with what you feel comfortable with.
Re: FHA HOME LOAN, CAN THE OWNERS LEASE THIS PROPERTY? - Posted by Paul Carlin
Posted by Paul Carlin on June 16, 1999 at 09:31:30:
No, in the contract they must be living there. After a year, in emergincy, they can get around that. But my experince is that FHA does not really care. As long as the payments are being made, they do not check nor ask about it. As far as they are concerned, all is good. This is risky, so only use it if you have too. Alot of condos in my area are bought through FHA and then rented out to students. I have never seen a owner get in trouble for renting out his place.