FHA and the 100 mile rule ?

[Kathy Kathman]

I recently made an offer on a duplex - I have owned my home for 10 years, and last year I got off my FHA loan and converted to a conventional loan (saving that MIP!) so I could purchase my owner-occupied multiplex with an FHA loan. I was pre-approved by one lender, but was also shopping another. I wasn't planning on making this first investment purchase quite yet, but the price and house were too good to pass up, so I jumped in. After my offer was made, the first lender called me and said that she spoke to underwriting, and they told her that I could not purchase my second home, even if owner occupied, with an FHA loan unless it was 100 miles away from the first home.

Fortunately/Unfortunately I wasn't the only one who saw the value in the duplex I made an offer on, and I was out-bid. I asked the second Mortgage company I was shopping if he knew anything about this rule. I did some of my own research and while I see the '100 year rule" for purchasing 2 homes under FHA, I cannot see where it says I cannot have my first home that I rent out under a conventional loan, and my owner occupied multiplex as an FHA loan. I did see that FHA is not to be used for investment loans. I spoke to the 2nd lender, and he also said he didn't see where it would be a problem.

What is correct? Does anybody have the source on this so I can help my lender(s) with it?