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A friend is refinancing his new wife's property so that they can renovate it and rent it out. He was told by one lender that there isa residency requirement. he is inclined to ignore this but I am wondering if there are penalties and how strictly they are ehforced.
i asked him to get expert counsel on this before just assuming he can ignore the rules.
I've been told the same thing, it is a completly different loan if you refi something you don't live in..
So he is looking to do an FHA refinance on an investment property? FHA loans have an owner/occupant clause in the contract that the buyer intends on living in the home him or herself. After living in the property for a year, if a situation merits a move and you cannot sell it, then renting it out is ok at that point, because the original intent was to be an owner/occupant.
If you finance a home via FHA and do not live in the home, that would constitute fraud (as you state in your loan documents that you will). If it become known that you were doing so, it seems that the FHA could call the loan due immediately and seek restitution for any associated costs as you lied in your paperwork.
The purpose of FHA loans is to provide a low down-payment option typically for first time home buyers, not to finanace a rental property.
Thanks. I have already passed that on.
So you have to live in it at least a year and "not be able to sell it?" I'm closing tomorrow with an FHA loan and I definitely intend to live in it for at least 5 years, but when I move what if I just don't want to sell it and instead rent it out? Am I free to do that or do I need to refi at that point?
it looks like a 12 month requirement. Having said that I suppose they might try to advance the laon basically forcing you to refinance. but there would not be civil or criminal penalties. no fraud charges or $10,000 penalties.
After living in the house for a year, you can do whatever you want with it. You won't be able to get another FHA loan though unless you meet one of 3 very rare situations.
You cannot purchase the home for the purchase of investment only though.
@cdtotten wrote:After living in the house for a year, you can do whatever you want with it. You won't be able to get another FHA loan though unless you meet one of 3 very rare situations.
You cannot purchase the home for the purchase of investment only though.
Not my house so I won't be doing anyting with it. But as i saida bove I will pass all this on.