Investor · Philadelphia, PA · Member since 2015 · 4 posts · 0 votes
To qualify for an FHA loan, you need to live in the property for 1 year.
While I intend to live in my new property for 1 year, I will also spend a considerable amount of time at my brother's house and my mother's house. I will probably have my "own" room at both of these houses.
Is this okay for the FHA loan if I don't spend every night in the new property? How often do they check to see if you are around and what kinds of checks do they do to see if the property is your "primary residence"? Do they knock on your door?
Thanks for any help or information on this topic. I just don't want to accidentally break the rules of the FHA loan that I want to take out.
Rental Property Investor · Ames, IA · Member since 2014 · 37 posts · 20 votes
10y
You would be fine renting out the other two rooms. It would be the same as if you bought a home and 2 of your friends became your roommates and they paid you rent. However, I believe you would need to include the income from the 2 other renters as income on your taxes (I would check with a cpa on that to be sure though).
Along with that, if you are planning on buying a single family home, I would use a conventional 5% down loan instead of an FHA loan. The Mortgage Insurance will be lower, and you won't have to pay what's called the "Up Front Mortgage Insurance Premium" which I believe is 1.75% of the loan amount.
If you are planning on buying more properties in the future, you could use an FHA mortgage to buy a multifamily property (up to a 4-plex) and still only put 3.5% down. You can only have one FHA loan open at a time, so if you think you'll buy more properties, I'd "save" your FHA loan and buy this single family with a conventional loan.
Rental Property Investor · Cleveland, OH · Member since 2015 · 1k+ posts · 880 votes
10y
I think you'll be fine. I think the main thing is to have your mail delivered to the property and no one else living there if it's a SFR. If it appears that you've rented the place out and aren't living there they can call the loan due.
Flipper/Rehabber · Tyler, TX · Member since 2015 · 25 posts · 10 votes
10y
If your mail is coming there and utilities are in your name, I highly doubt there would ever be any questions asked by anyone. You could set up automatic payments and travel the world for a year and no one would ever know.
Investor · Chicago, IL · Member since 2014 · 169 posts · 29 votes
10y
I purchased a home with an FHA loan earlier in the year and have yet to be "checked on" by anybody. Like the previous replies suggest, as long as you have that address listed for your bills and the utilities under your name you will be fine.
Rental Property Investor · Tulsa, OK · Member since 2012 · 291 posts · 102 votes
10y
From my understanding, the rule is in place so that consumers do not exploit the financing opportunities FHA provides. They want to offer affordable lending to borrowers that plan to buy and live in their home and not investors. I think your risk is negligible if you plan to live there yourself even though you might not be there very often. I think they just want to prohibit you from utilizing their funding to convert it to a rental and rent it out. If you have friends or family's renting a room from you, again, I don't think that is a problem.
Kalamazoo, MI · Member since 2014 · 224 posts · 129 votes
10y
a primary residence is the "place where you intend to return when away". That's a very specific legal description I know, but essentially it contemplates that you will be away from time to time. But evidence of your intent to return would be utilities on in your name (no renters), mail coming to that address, driver's license changed to that address, etc.
Investor · Philadelphia, PA · Member since 2015 · 4 posts · 0 votes
10y
Thanks everyone who responded to my question.
It seems I don't have much to worry about living there.
Here's a question, however, that came to mind upon reading your responses:
What if I buy a 3 bedroom house with an FHA loan and decide to live in one of the rooms. Will I be able to rent out the other 2 rooms in the house? Or, is this against the terms of an FHA loan?
The house will still be my "primary residence" but I am wondering if the act of renting out rooms in it, as well, will break the rules.
Thank you to anyone who has any information about this.
Rental Property Investor · Ames, IA · Member since 2014 · 37 posts · 20 votes
10y
You would be fine renting out the other two rooms. It would be the same as if you bought a home and 2 of your friends became your roommates and they paid you rent. However, I believe you would need to include the income from the 2 other renters as income on your taxes (I would check with a cpa on that to be sure though).
Along with that, if you are planning on buying a single family home, I would use a conventional 5% down loan instead of an FHA loan. The Mortgage Insurance will be lower, and you won't have to pay what's called the "Up Front Mortgage Insurance Premium" which I believe is 1.75% of the loan amount.
If you are planning on buying more properties in the future, you could use an FHA mortgage to buy a multifamily property (up to a 4-plex) and still only put 3.5% down. You can only have one FHA loan open at a time, so if you think you'll buy more properties, I'd "save" your FHA loan and buy this single family with a conventional loan.
Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
10y
I can't speak to FHA residency but I know that in other situations residency is questioned if you fail to change your drivers license, registrations and tax address to the new location, particularly if you have them in another state.