No longer living in FHA purchased property, What to do now

14 Replies

Hello all

I'm new here and had a question regarding a home i purchased in 2011. I am extremely new to real estate and while I have been trying to find an answer to this through searching, I thought I might get a better result by asking. Please forgive me if this has been covered before or is a stupid question.

The home was financed with an FHA 203k loan closed in august 2011. I purchased the home and lived there until I got married in September 2012. Instead of selling the home, I have had family living there and paying the mortgage on it since. The loan is under my mothers and my name.

My wife and I are now looking to purchase a duplex and would also like to apply for an fha loan. I know that when i apply for a pre approval, it will show as if I am still obligated to pay for the home that is being "rented out". My question is, what is the best option at this point? Should we refinance and leave it only under my mothers name? Can that even be done? (she is willing to and it was actually her idea)

I did not invest anything out of pocket in this home. The down payment was a gift from my parents, all i paid was the monthly mortgage payment. I dont really have a problem with losing anything on this house, I just want to make the best case for getting approved for a new loan.

Any help and suggestions are welcomed.

Thanks

Hello Jason,

So FHA is very specific with when you can actually have 2 FHA loans ( Yes this is posible ) and from what I understand from your post you have a couple of options.

- You can have your mom refinance it into her name only if she can qualify for it.

- Because you moved out and are renting it to someone else you would need 12 months of cancelled checks proving that you're not making payments. Then you could get another FHA loan if you were a co signer and this is the only scenario where you can have more than one FHA loan.

-You can get a conventional loan as long as you have at least 5% down ( 20 or more you'll avoid mortgage insurance ) and again you would have to get cancelled checks for 12 mths showing that  you're not paying the mortgage.

- The family member living in the home could purchase it if they qualify as well. 

 

You have a lot of options on this one.  If you have any more specific questions ask or email me Sir. 

@Jason Forbes

If the first loan has good terms why uposet the apple cart.........get a loan thats not a FHA. You have very limited info bet here is my best guess. Since you had little to no down on the first house my guess is your not swimming in free cash. FHA is not likely going to loan you on another home since that will look like an investment property. Now if you have a 30% down and landlord history you may be in buisness. I suspect the reason your on your moms home now is she could not qualify on her own..or you ? Lots of varibles here but hopefully you have a sizable down payment.

@Shaun Weekes

Thanks for the response. Just to clarify, I would need to show 12 months of cancelled checks showing where the payments are being made from to prove that I am not making them?

In my case, my grandparents have been living there and they are on government aid. When they receive their pay, my mother who is in charge of their account, makes the payments from their account.

@Jay C.

Thanks for the suggestion. Unfortunately I do not have the funds at the moment for anything more than a 5% dp. So my options are limitied to fha or home path. I could not qualify on my own due to little credit history, that is why she cosigned.

I'm leaning towards just having the home refinanced and having myself removed from the loan. Seems to be the easiest option at this point.

@Shaun Weekes Good luck on the loan. Since this is a home and not a Kia getting your name removed is easier said then done. Not to mention its not free if they will even alllow it.

We did an FHA streamline refinance, and the fees were much less and a great rate, even though the property was rented out, but not sure they are still doing it and also not sure if they would do it for only one of you, letting the other off the loan, but it might be worth it to check it out as if that is available to your mother, it would solve your problems easily.

Jason,

If your grandparents qualify for the mortgage themselves and refinance under just their names you would be removed from the the loan and title.  So if this is possible I would go that route.

If you have you have 5% percent to put down you can also qualify for a conventional loan as long as you show that your grandparents have been making payments ( which they have ) with 12 months of cancelled checks or 12 months of their ( grandparents ) bank statements.


In this situation if the G parents qualify for a refinance that would automactically take Jason off the loan. 

Homepath is really good and regular conventional also does 5% down

Streamlines are great but the only issue in this scenario is if you do one all the original people on the original loan would have to be on the streamline as well.

This link:  http://budgeting.thenest.com/remove-coborrower-usi...

seems to suggest you can remove a co-borrower using an FHA streamline refi as long as the one borrower can qualify on their own. I'd talk to your current mortgage lender before ruling it out as an option.

Lynn M,

I'm doing some research and so far I've found out that you can get off title.  I'm seeing if you can get off the mortgage as well and in that case I stand corrected. 

I will post about the mortgage as soon as I get confirmation :)

@ Lynn

Looks like you can be removed from the mortgage as if the other signers qualify for the mortgage. 

Lynn thank you for pointing that out. 

Originally posted by @Shaun Weekes :

Jason,

If your grandparents qualify for the mortgage themselves and refinance under just their names you would be removed from the the loan and title.  So if this is possible I would go that route.

If you have you have 5% percent to put down you can also qualify for a conventional loan as long as you show that your grandparents have been making payments ( which they have ) with 12 months of cancelled checks or 12 months of their ( grandparents ) bank statements.


In this situation if the G parents qualify for a refinance that would automactically take Jason off the loan. 

Homepath is really good and regular conventional also does 5% down

Streamlines are great but the only issue in this scenario is if you do one all the original people on the original loan would have to be on the streamline as well.

The OP's mother is on title with him, not his grandparents.  If his grandparents can qualify for a loan, it's not a refi situation, is it?  Rather the OP and his mother would have to sell the property to the grandparents and they would be getting a new loan.

I went off track and didn't read this one completely through and through.  Kristine it looks like the mother and the son are on the mortgage. 

So here is another solution, if the G parents qualify for the mortgage and you add them to title they can refinance after six months.  The mother can also do a gift of equity sale to the parents so that they don't have to qualify for the entire sale price.

The mom could also refinance the home with the G parents and that would take Jason off the loan as well. 

@Shaun Weekes  -- You can't get 5% down conventional loan on a multifamily such as duplex, right? What about a non owner occupied single family?

@Cole A.  

The lowest minimum you can put down on a duplex is going to be 15% if you go conventional owner occupied. If it's an investment you're looking at 25% down.

If you're looking at staying in the property FHA will go down to 3.5%

N/O/O single family is going to be a minimum of 15%

If hope this helps and have a great day Sir.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.