Question about low down payment loans

[Keith N.]

Hi guys,

I am planning on purchasing my first investment property (also first property ever) very soon. I plan on owner occupying this property for a short period of time, and then quickly buying a second property and turning the first property into a cash flowing rental unit. I have enough money saved to put 3.5, 5, or even 10% down on a loan and I do in fact plan on using the FHA loan if I can qualify. I know that most pure investment properties require 20% down, which I cannot afford at this point.

My question is about the legality issues of purchasing a property using the FHA loan (or a conventional loan with a low down payment). How many years are you supposed to "intend" on owner-occupying this unit to be approved for the loan. Can I "intend" to live in this unit for 3-6 months and then move out, or do I have to "intend" on living in the unit for 2 years? What could happen if I do actually begin renting out the unit before I am technically supposed to?

I am not trying to say that I plan on breaking the law or doing anything illegal, however I would like to know the specifics of the rules when applying for these types of loans which are normally only given to people who plan on owner-occupying.

Basically, I want to have the opportunity to begin making money as soon as possible.

Thanks!

[Justin Thompson]

Originally posted by @Keith N.:

@Justin Thompson

 Gotcha, thanks.  Hypothetically speaking, What type of repercussions might ensue if caught?

Hypothetically speaking... when you close on a FHA loan you have to sign a document that you will be owner-occupying the property within 60 days of the closing. There are also guidelines stating 1 year minimum you must occupy the residence. If you rented it out in say 6 months after the closing and they caught you, you'd be in violation of the loan. They could do a number of things but more than likely they'd call the loan in or hit you with some kind of civil legal action for mortgage fraud/violation. Not sure exactly how strict they are or what they'd actually do if they caught you. I know an investor locally who was buying HUD homes in the owner occupant only bid time frame. They are going after him for fraud.