I've seen similar questions posted previously, but have not the exact answers that I need.
I'm looking at a Duplex and trying to get an FHA loan as an Owner Occupier. FHA requires me to move in within 60 days of closing, however the city requires 120 days notice for "no cause" evictions of month-to-month tenants who have been there for more than 2 years. I want to purchase with the intention of moving in within 60 days, but it may not be possible in this city because the tenant has 120 days to move.
- FHA has not answered my questions about extenuating circumstances and my lender only knows what it says in the HUD handbook, which is 60 days.
- The seller absolutely refuses to evict anyone themselves (I've asked twice), though they recognize that the sale will mean someone gets evicted.
- I have enough for a conventional loan, but just barely. I would have no safety net if I had to put 20% down and I'm hoping to use the balance of my savings for a 2nd property in the future if I can make it as a landlord.
- My lender claims there is no way to do less than 20% on a multi-family property and still get PMI. She claims that this has nothing to do with my income, credit or savings, it's just not possible for multi-family properties. This seems off to me.
- My lender says her institution does not check occupancy, but does not know what FHA does.
1) Is there an exception in FHA for extenuating circumstances like this?
2) If anyone knows of program that allows me to buy a multifamily with less than 20% down I would be interested.
Owner occupied duplexes, conventional with no special program, you can do 15% down assuming 3 or fewer currently owned properties with one or more mortgages.
Offer to pay the tenant to move by an agreed date? Notarized the terms?
There are two issues here:
1) 60-day occupancy. There are no exceptions to the guideline:
2) Whether or not to purchase the property using FHA under the circumstances you described. Your choices are:
- ask the tenants to vacate early; pay them if necessary, as suggested by @Courtney Preston
- purchase using FHA HomeReady (15% down on duplex, as stated by @Chris Mason )
- Find another property for FHA purchase
- commit mortgage fraud by not honoring the FHA occupancy requirements.
NOTE: you will find a lot of discussions on BP about the likelihood of being discovered for not occupying the property, and the respective punishment for doing so, but the end result is that it's mortgage fraud.
Walk away from the deal if the seller will not provide vacant occupancy, you must make that a condition of purchase. Move along there are more deals to be found.
@Patrick Corcoran How about having the seller start the eviction and at the same time you sign a lease that starts the day after the tenant moves out. You would need to delay the closing to make it happen, but the seller doesn't have a risk of having a vacant unit. If this doesn't make sense I'll blame it tonight's excess wine.