FHA 60-Day Occupancy: Owner Move In Eviction takes 120 days

[Patrick Corcoran]

I've seen similar questions posted previously, but have not the exact answers that I need.

I'm looking at a Duplex and trying to get an FHA loan as an Owner Occupier. FHA requires me to move in within 60 days of closing, however the city requires 120 days notice for "no cause" evictions of month-to-month tenants who have been there for more than 2 years. I want to purchase with the intention of moving in within 60 days, but it may not be possible in this city because the tenant has 120 days to move.

Further points

- FHA has not answered my questions about extenuating circumstances and my lender only knows what it says in the HUD handbook, which is 60 days.

- The seller absolutely refuses to evict anyone themselves (I've asked twice), though they recognize that the sale will mean someone gets evicted. 

- I have enough for a conventional loan, but just barely. I would have no safety net if I had to put 20% down and I'm hoping to use the balance of my savings for a 2nd property in the future if I can make it as a landlord.

- My lender claims there is no way to do less than 20% on a multi-family property and still get PMI. She claims that this has nothing to do with my income, credit or savings, it's just not possible for multi-family properties. This seems off to me.

- My lender says her institution does not check occupancy, but does not know what FHA does.

1) Is there an exception in FHA for extenuating circumstances like this?

2) If anyone knows of program that allows me to buy a multifamily with less than 20% down I would be interested.