FHA Loans: How Much Owner Occupancy?

Question

Okay, odd question.  I work overseas full time, and I don't currently have my own personal residence back in the US.  I was considering perhaps looking at an FHA loan to purchase an investment property in my home state (FL), maybe before I even get back for good.  I'd like to house hack a 2-4 unit property and fulfill my legal obligation to occupy one of the units, but that's where I get into uncertain territory.  Aside from getting my mail there and staying there when I come home on vacation, I wouldn't exactly be doing much occupying of the unit, I'd be there less than a month out of the year and spending the rest of my time in a barracks overseas, making that Rambo money.  Would this be in some way a breach of the FHA loan terms?

Account Closed · Answer

You have a special circumstance that might allow for that situation. If you would have a family member live there you are clear as I have posted the guide line from HUD "Military Personnel Eligibility". You will be looked at weather you actually intend to live there at all in underwriting but you are not actually violating the terms.

"Borrowers who are military personnel, who cannot physically reside in a Property because they are on Active Duty, are still considered owner occupants and are eligible for maximum financing if a Family Member of the Borrower will occupy the subject Property as their Principal Residence, or the Borrower intends to occupy the subject Property upon discharge from military service."

Mindy Jensen · Answer

@Alex SImon , from a never-worked-in-your-position standpoint, I can see why people ask when you're going to stop working there, because it seems like a dangerous position. You didn't originally say Saudi Arabia, you said overseas making that Rambo money. Rambo doesn't get paid to count flowers and take naps.

If you have long-term plans to be overseas, perhaps an FHA loan won't work, but there are plenty of other options. People buy rental properties all the time with mortgages, but most have higher down payments. That Rambo money should make a down payment easy to come up with - especially if you're looking into the midwest, where buy-ins are a whole lot less than places like CA or NYC.

Like @David Dachtera  said, speak with an FHA lender who can give you more guidance. Just because FHA may not be an option doesn't mean you can't buy start buying properties.

Of course, the MOST IMPORTANT THING is to find an excellent property manager to run these while you're incommunicado. Almost more important than finding a good loan is finding someone to take good care of your investments. Good luck and let us know how this turns out!

David Dachtera · Answer

@Alex SImon,

Have you discussed this an FHA lender? They may have a better feel for those guidelines / requirements.

Maybe even try inquiring of the agency itself. That may be challenging, but in your case, it may be worthwhile.

If you have any family who would live there while you're out of the country, that might qualify, depending on the response you receive from those inquiries. Spouse would probably be ideal. Others? Ask.

Alex SImon · Answer

@Mindy Jensen  Thanks for the input.  I guess I probably wouldn't count as occupying the residence in the strictest sense, which is a shame.  I had hoped to use it as a nice little investment while I'm working out here in Saudi.  I'm using conventional loans to finance my other investment properties, I just figured this could run parallel to that strategy and let me get a couple more doors down this year.

One that really bugs me is when people always ask me what my end date is for my position.  Like, I don't know, when do you plan to quit *your* job?

Mindy Jensen · Answer

@Alex SImon , as I understand it, FHA loans require you to live in the property as your primary residence for one year.

While you are not required to sleep in the home every single night for a year, I would expect their definition of primary residence is a little different than what you can do at this time.

Do you have an end date for your current position?

You can try a conventional loan. Just make sure you are honest with your intentions.

Alex SImon · Answer

Hm.  Thanks for the advice Bill, but the problem is that I'm not in the military.  I'm a contractor working through a subsidiary of a subsidiary of a big defense contractor, so while I'm serving in a roundabout way, I don't have any of the many, many protections and exceptions that are afforded to active duty personnel.