Refi out of FHA house hack after moving states

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Refi out of FHA house hack after moving states

Michelle Bright
Realtor · Chicago, IL · Member since 2014 · 137 posts · 103 votes

We moved out of state last fall. Our first purchase and first house hack was a duplex in Northeast Indiana. We moved to Illinois right at the one year mark because my husband's job transferred us. We are renting in IL now and was wondering if we are required to refi out of our FHA loan. If not required is there a benefit to doing so?

We only put down 3% on a $67k purchase price and have not been making extra payments so there is no equity to pull out. I just want to make sure we are doing the right thing.

We had a lender tell us once before if one has to move because of a job transfer or some other reason outside of their control there is no penalty if the move occurs within the first year of the FHA. We have paperwork from his employer of course but is this a true statement I heard from this one lender?

Thanks BP!

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Kevin Romines
Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
8y

@Michelle Bright Yes, it is true, if you are transferred because of employment it falls in the category of an unforeseen event and the lender will not require you to owner occupy the property to the 1 year requirement in cases such as these. 

If you are living more than 100 miles away from the previous property, you can keep the FHA mortgage on that property and then go get another FHA loan for an owner occupied home. The lending guideline is only for this very situation, so you are in a lucky position.

If the original property gains enough in equity to the point where you 20-25% equity, then at that point I would consider refinancing into a Fannie Mae loan without mortgage insurance, but I wouldn't consider doing that until you confident that you have the equity position. Until then, stay as you are. 

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  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    8y

    @Michelle Bright Yes, it is true, if you are transferred because of employment it falls in the category of an unforeseen event and the lender will not require you to owner occupy the property to the 1 year requirement in cases such as these. 

    If you are living more than 100 miles away from the previous property, you can keep the FHA mortgage on that property and then go get another FHA loan for an owner occupied home. The lending guideline is only for this very situation, so you are in a lucky position.

    If the original property gains enough in equity to the point where you 20-25% equity, then at that point I would consider refinancing into a Fannie Mae loan without mortgage insurance, but I wouldn't consider doing that until you confident that you have the equity position. Until then, stay as you are. 

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  • Michelle Bright
    OP
    Realtor · Chicago, IL · Member since 2014 · 137 posts · 103 votes
    8y

    Thank you @Kevin Romines!!! I greatly appreciate your response and that give me a lot of confidence because I have been battling with myself back and forth on if we should purchase here or not. Chicago is much more expensive than Indiana, much much more!

    Who do I go about telling about the situation so that we could qualify for another FHA? Only the new lender or do I need to let the company currently servicing our mortgage know also? The company that we obtained the mortgage initially has since sold it to Oceanside Mortgage.

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  • Kevin Romines
    Lender · Winlock, WA · Member since 2013 · 1k+ posts · 1k+ votes
    8y

    @Michelle Bright You only need to go make application with the new lender. They will ask enough questions to uncover the fact that you were transferred and may require proof of such? If not, don't worry about it. 

    You wont need to talk to your existing lender regarding anything. If they were to call or communicate in some way saying your not owner occupied and wanting to know the situation, you can provide the transfer documents to them at that time, but otherwise, no worries. 

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    8y

    @Michelle Bright - RELOCATION - A Borrower may be eligible to obtain another FHA-insured Mortgage without being required to sell an existing Property covered by an FHA-insured Mortgage if the Borrower is:

    - relocating or has relocated for an employment-related reason; and
    - establishing or has established a new Principal Residence in an area more than 100 miles from the Borrower’s current Principal Residence.

    I believe you need 15% equity in the first property to qualify for a second FHA

    Also, you can refi the first property but then you would need 20% down for a SFH and 25% down if it is 2+ units

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    8y

    @Kevin Romines is of course spot on @Michelle Bright, only thing I'll add is that I believe you ALSO just described a scenario wherein FHA will 'count' the departing residence rental income to boot, if needed to make the numbers work.

    And this really is a nice opportunity for you. "Can I have another FHA loan even though I already have one?" and "Can I count the rental income" are both a solid NO in about 99 out of 100 scenarios (many threads exist that are exactly that), you are the 1 in 100.

    If you are looking for an SFR, one of the non-FHA 3% down options may be a better fit. Do a side by side with both.

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