Investor · Oakland CA & Las Vegas NV · Member since 2019 · 72 posts · 112 votes
Hello,
My brother and I live in Oakland CA and are considering investing in a multi-family unit here in the bay area using an FHA loan. That being said, we like the home we're living in now and ideally wouldn't look to move however I believe that using an FHA loan requires the borrower to live in the financed property for at least a year?
My question is, is it common for people to "say" and "show" they live at the FHA financed residence by having the bills in their name and so forth without actually living there? If my brother uses an FHA loan to acquire a four-plex as his "primary residence" and then rents out all of the units instead of physically living in one, would it introduce a significant amount of risk, and if so what kind?
@Rob Kishi that is mortgage fraud- please remember that the lender who issues the loan is a licensed professional and if anything fraud related comes up on their audits, that could put them in a difficult position. I’ve had clients who have tried to commit mortgage fraud and I’ve fired each one of them. It’s not worth jeopardizing my career and livelihood.
If my brother uses an FHA loan to acquire a four-plex as his "primary residence" and then rents out all of the units instead of physically living in one, would it introduce a significant amount of risk, and if so what kind?
What you’re describing would be mortgage fraud. Not worth it.
It is a requirement to live in the property for a minimum of a year under an FHA loan. And even then, if he chooses to move out after the year it has to be refinanced if he will not keep it as the primary residence. As Kyle stated, what you and your brother are proposing is mortgage fraud. FHA mortgage fraud can lead to up to 30 years in prison and $1,000,000 in fines. Either your brother goes through the correct process and live there for at least a year or search for a loan more investor friendly. Trying to go for 4 unit cash flow is not worth it.
Seriously? You only need to live in the property for te first year,....then you can move somewhere else. People do THAT all the time
What they don't do is go on a public social media platform with their real name and area they live in and admit they are thinking about commiting mortgage fraud. :-)
If you want to "stay comfortable" don't even get the FHA loan in the first place.
Actually, you do not have to refinance in order to move out after the first 12 months. You can move and keep your fha loan, and rent out all units. But you absolutely need to move in (within 60 days?) and “intend” to live there for 12 months.
There are some exceptions. Job transfer, marriage, change of family situation (place becomes too small after having children). But generally, you must live there 12 months.
@Anthony Wick My understanding in being able to carry two FHA loans is the reasons you mentioned along with an exception of the second property is at least 100 miles from the first property. Then no, he wouldn't need to refinance and can maintain the first one. I mentioned them refinancing because it seems they want to stay in that area with their investments.
@Rob Kishi that is mortgage fraud- please remember that the lender who issues the loan is a licensed professional and if anything fraud related comes up on their audits, that could put them in a difficult position. I’ve had clients who have tried to commit mortgage fraud and I’ve fired each one of them. It’s not worth jeopardizing my career and livelihood.