Breaking FHA rules.

112 Replies

I would NOT do this... Especially now that you posted on a public forum about it.
If you really want this you will have to make some moving. You could even rent out the home you own at the same time you will speed up your process by doing it this way and you won't be worried about going to jail. It's like a triple win!

@Account Closed I am a mortgage lender. This is a terrible idea as it qualifies as mortgage fraud. Which is technically punishable up to 30 years. You will also sign a mortgage and on the mortgage, there will be a clause that requires you to move into the property within 60 days and live there for up to 12 months (assuming no unexpected circumstances: e.g. your employer moves your position) all of this said, using a FHA 203k or a Conventional Homestyle Renovation loan to purchase a home can be very beneficial. But you do want to ensure you follow the law and actually move into the property.

Here's the biggest thing you need to realize, setting aside the mortgage fraud part of the equation. Underwriting will ask for a motivation going from a single family home to a multi family since that is considered a downward move and your motivation is what? Being an investor? I dont know a DE UW around who wouldn't sniff this out before it ever remotely gets to closing. 

@Ryan Harsche just wondering if you could provide other legitimate reasons for not moving into a fha home? You Gave an example of an employer moving you, but are there others? For instance, I buy a home that I love and intend to stay in, but then a week after closing a different home is

Listed that I absolutely love...

Bottomline is FHA does do door knock audits to confirm you a re living in the home and if you aren't they will call the loan immediately. Like Ryan said your playing with a flaming tank of gasoline

Let me rephrase. Is there an actual list of reasons why someone could legally go against this contract? Is the key word in the contract “ intent”? I could intend all kinds of things. I’m asking this question for people out there that might feel they have a fairly legitimate reason for moving out within a year, or for those that already have moved out of their fha loan home and now in reading this post are scared to death that they are going to go to jail. Are there going to be a bunch of new investors scrambling to move back into their prior homes for fear of jail time?

I asked my lender this same question a few years ago and his response was simply that if someone wants to be a serious investor then that one indiscretion could potentially jeopardize their investing future forever, at least in regards to building a team of people with integrity. I think that the best people you could find to have on your team would not agree with purposefully going against owner occupied rules just to get a deal.

@Philip Willis  I mean it's honestly this simple.  Occupancy Fraud is still Fraud.  So if you want to go against it, you are committing Fraud.  You are lying on your mortgage application, which is punishable by law with up to 30 years in prison.  It's also not enforced by your local town police, it's enforced by the FBI.  Outside of that, I can't find another reason why you shouldn't do it. 

I am not advocating that you do this, but I know people who have. Your chances of getting caught? Not high. You could do it, rehab all units, refinance out of it asap. 

Some banks will do 10% down and no MI. 

 Account Closed There are people who do this.  As a real estate agent, I've come across it a few times.  The people who have done that also tend to cut corners in other ways.  In each case I have decided not to work with those people.  If they are willing to lie to the government, why would they tell the truth to me.  

What I am saying is that even though you may be a person of integrity, actions like this can make it seem otherwise.  It could effect your career moving forward.   

Good luck and I hope this helps!

@Oliver Bergsjo I agree. I didn't really know if the whole "living there for a year" was a big deal or enforced or unethical. That's why I asked the question. I have no intention of doing the plan. And I agree about being moral. Morals are my primary why in the first place. Helping charities that help animals is my biggest motivation

Where money, rules and the government are in play together, don't tempt fate.  You're putting a lot more than your real estate investing ability in jeopardy with this plan.  I can't put a scenario together that would warrant taking this kind of risk.     

@Account Closed

Can you just find a different MF that your GF would like to move into? I've seen seperate houses on the same property for sale. One Mortgage, multiple units but similar to having your own home. Will this work?

I'm new at this and don't own a property yet. Im very much in the beginning stages. Got the preapproval for a mortgage, worked numbers on a bunch of properties and am starting to work with an agent. Ive read a bazillion books, listened to webinars and all sorts of podcasts. Im so excited about this that I'm sure I could sway anybody's opinion into moving into a rental property for the HUGE financial freedom that it brings in the long run. I actually worry that I talk about it too much but now my wife is actually sending me links to properties she likes. Which is AWESOME. Have your GF do some MF shopping with you, let her pick out some properties and get excited.


Originally posted by Account Closed:

@Jordan Moorhead Yeah I'm willing to move, but my girlfriend isn't. And if she's not on board, I'll just have to do some other plan. And yeah I had no interest in going around the law in any way

 Like Bob Marley used to sing: "No woman, no cry." Think with your big head, my friend.