FHA house hack do I need to sell my current house?

[Nate Castle]

I am looking at a 4plex and I will need to go FHA. I know that I will need to live in the 4 plex for at least 1 year. My question is: do I need to sell my current home before I move into the 4 plex? My current home has conventional financing. Thank you!

[Andrew Postell]

@Nate Castle @Tashina Taylor @Sam Trentwood there are some REALLY important rules to be aware of here when buying a property with an FHA loan and you currently OWN a home. This is going to sound a little crazy but this is directly from the FHA:

1. If Rental Income is being derived from the Property being vacated by the Borrower, the Borrower must be relocating to an area more than 100 miles from the Borrower’s current Principal Residence. The Mortgagee must obtain a lease agreement of at least one year’s duration after the Mortgage is closed and evidence of the payment of the security deposit or first month’s rent.

This is essentially stating that if you need that rental income you must be moving more than 100 miles away and have an executed lease.  If you don't need the rental income to qualify then you don't have to worry about it. But that's not all...

2.  Where the Borrower does not have a history of Rental Income for the Property since previous tax filing, including Property being vacated by the Borrower, the Mortgagee must obtain an appraisal evidencing market rent and that the Borrower has at least 25 percent equity in the Property

So if you DO need the rental income not only do you have to move 100 miles away...you ALSO have to have an appraisal...AND that appraisal needs to reflect 25% equity in that property! If there's not 25% equity, then you can't use the rental income. That's an insane requirement. And that's why this is pretty hard to do in many FHA scenarios like this. Again, if you don't need the rental income, then it doesn't matter. So please do speak with a lender and get prequalified to find out if you need it or not.

Hope this helps!

@Nate Castle