FHA Relocation Within First Year

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FHA Relocation Within First Year

Scott Thompson
Real Estate Investor · Dallas, TX · Member since 2014 · 12 posts · 4 votes

I am looking at purchasing my first property in the near future using an FHA loan, but have a question regarding the requirement to occupy the home for the first year. I am on a rotational program at my company where they put us through 3 distinct one-year rotations, and we have literally no visibility into where they are going to place us until approximately one month before starting the new position. If I were to purchase a SFR or duplex and then 3 months later find out that I'm being sent to California, does this exempt me from the owner-occupy requirement for the remainder of the first year? How does that work?

I've read a thousand posts and articles about how if you relocate you're allowed to pick up a second FHA mortgage, but I'm not interested in that at all and none of them seem to specify whether that applies during the first year. I don't see anything on the HUD website or anywhere else on the WWW indicating that this situation would be particularly problematic, but wanted to consult the (much wiser) folks on BP.

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Travis Sperr
Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes
12y

@Scott Thompson I think it will be difficult to find a straight forward answer on this topic, probably why there hasn't been a slew of reply's. In my limited knowledge on this matter I believe you would have to more or less plead your case to a HUD/FHA rep as to why you need another FHA mortgage.

One option you may consider - if you have the available cash to put 3.5% down twice is to just put 5% down and go conventional, FHA loans have become very expensive when you consider the PMI that stays for the life of the loan.

A second option (and better one) just keep building capital until you know where you will eventually end up. The last thing you want to do is buy a property in Dallas and California, then end up in Boston, with two properties that have low/no equity in them.

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  • Travis Sperr
    Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes
    12y

    @Scott Thompson I think it will be difficult to find a straight forward answer on this topic, probably why there hasn't been a slew of reply's. In my limited knowledge on this matter I believe you would have to more or less plead your case to a HUD/FHA rep as to why you need another FHA mortgage.

    One option you may consider - if you have the available cash to put 3.5% down twice is to just put 5% down and go conventional, FHA loans have become very expensive when you consider the PMI that stays for the life of the loan.

    A second option (and better one) just keep building capital until you know where you will eventually end up. The last thing you want to do is buy a property in Dallas and California, then end up in Boston, with two properties that have low/no equity in them.

    1Reply
  • Mark Houghton
    Investor · Guttenberg, NJ · Member since 2013 · 29 posts · 6 votes
    12y

    I have been looking to get into a property in a very similar fashion as yourself and have posed the same question to my mortgage broker. Now, keep in mind where the info is coming from. But, for what it's worth the FHA's main focus is the home buyers intent. If you INTEND on making that property your PRIMARY residence within the first year then you're in the clear. How are you or any other home buyer supposed to know that you job will relocate you? It's not like that's a choice that your making on your own. I wouldn't worry too much about the the nuances of your situation. If you intend on living in this property I say go for it. Better yet, contact a mortgage broker in your area, ask them the same question and go from there. Best of luck.

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  • Scott Thompson
    OP
    Real Estate Investor · Dallas, TX · Member since 2014 · 12 posts · 4 votes
    12y

    @Travis Sperr

    But that's the thing- if relocated I wouldn't take a second FHA mortgage. My company would put me in corporate housing, so I would not need another FHA mortgage. I would simply want to not live there as my primary residence and rent it out if relocated. And then after one year I would come back to Dallas so I would be back in the area where my property is, negating the management issue.

    Right now, since I have no inkling of whether or not I would be sent somewhere else and the percentage of people sent out of Dallas is small, I am operating on the assumption that I will be here. But I'm just trying to get my contingency plan lined up and limit any downside risk associated with purchasing my first property.

    I appreciate the feedback so far!

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    I have brought this question to my lender when my wife and I were in a possible tranfer phase. I was told you are able to move under FHA guidlines and purchase another property through FHA financing as long as you sell previous residents or refinance to conventional mortgage. If you do you would have to provide proof you are indeed moving from your employer.

    If possible there are 5% down conventional mortgages that have stricter guidlines

    and will likely cut PMI down.

    Also I purchased my current residents in july through 3.5% down

    FHA and since then fixed the place up and am looking to refinance through conventional lending, I figured I could put more money down to get away from pmi or use that money and increase the value of the property and refisnce my way out of pmi. s

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  • Travis Sperr
    Lender · Denver, CO · Member since 2009 · 1k+ posts · 597 votes
    12y

    I read that incorrectly, I thought you were looking for multiple FHA loans.

    I would not be concerned about obtaining an FHA loan with the intention of it being your primary residence, getting relocated for work and renting out the property.

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  • Scott Thompson
    OP
    Real Estate Investor · Dallas, TX · Member since 2014 · 12 posts · 4 votes
    12y

    @Shawn Mcenteer Can you talk a bit more to 5% conventional financing? It seems to me that it's hard to find. From the reading I've done, 20% is typically required for a downpayment. I simply cannot put that much down right now and have cash reserves to cover any emergencies that might come up. 5% I can definitely handle, but I just don't know what hoops I have to jump through to get it.

    @Travis Sperr That's what I figure but wanted to get some affirmation. Thanks!

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    @Scott Thompson it may vary regionally. The 5% guidlines will vary pending on credit score. For me my credit needs to be 720 or greater to make refinancing worth while also since I am likely not moving I need to be on my fha loan for at least 6 months prior to refinancing. What I would recommend for you is to google about 5% down, plenty comes up. Also shop around with lenders, do not stop at one because they do not oblige to 5% financing options. Just make sure you disclose your plans to whoever you speak with to ensure it is indeed possible.

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  • Ann Bellamy
    Lender · Tyngsboro, MA · Member since 2009 · 3k+ posts · 2k+ votes
    12y

    It would seem to me that if you knew you were coming back to the original FHA financed house, then it would still be your primary residence, even if rented out temporarily, because you know you are coming back and are not trying to get another mortgage. I would document my intent, and I would be sure when I rented out the house, that the tenants were aware (in writing) that you will be moving back into the house on a specific date, so that you don't have issues with having them leave.

    You can still have issues, but this might help set the expectation.

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  • Mike HurneyPro Member
    Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
    12y

    @Shawn Mcenteer "I figured I could put more money down to get away from pmi"

    @Scott Any other way you could increase Equity and Lower your LTV?

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    @Scott Thompson

    You are fine! Moving for employment is specifically allowed. No need to sell, or refi.

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    @Mike Hurney I do not follow what you are quoting from me? Are you asking me to explain what I am doing by putting down a small amount through FHA and then refinancing?

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  • Kerry Smith
    Real Estate Broker · Sanford, NC · Member since 2014 · 169 posts · 69 votes
    12y
    As long is it is a legit move for work, I do not think there would be a problem.
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  • Scott Thompson
    OP
    Real Estate Investor · Dallas, TX · Member since 2014 · 12 posts · 4 votes
    12y

    @Mike Hurney Well right now I'm just at the prequal stage, so no specific property is in mind (yet). My realtor wants me to get prequalified so she knows what kind of capital I have access to, and I think it's a necessary part of laying the groundwork as well. Whatever number they give me from a prequalified perspective I'm not going to treat as a true upper threshold, because I think if I found the right property increasing the equity/forced appreciation could help me out.

    I have a car that is probably worth ~$10k that is completely paid off, so I am considering pledging that as collateral. I think between that and living in the property I may be able to get a 5% conventional, which I would much prefer. I think right now I just need to check out different lenders and see who wants my business the most.

    @Wayne Brooks I appreciate the affirmation! That gives me a bit more peace of mind going the FHA route.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    12y

    @Scott Thompson

    You will qualify for a certain loan amount, period. The only determining factor above that is your amount of cash to put down. "Forced equity" doesn't enter into the equation. Lenders won't consider your car as additional collateral, they're only lending on the RE.

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  • Mike HurneyPro Member
    Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
    12y

    @Shawn Mcenteer I'm only asking if you've looked at any ways to increase your Equity and move away from PMI?

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  • Mike HurneyPro Member
    Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
    12y

    @Scott Thompson That's the way to do it. Get Prequalified to see what you need to work on!

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  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    @Mike Hurney yes I am renovating house and looking to refi by april.

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