How long do I have to live in one side to obtain an FHA loan?

7 Replies

Currently residing in Denver CO and saw a duplex that I really like. In CO, to buy said duplex using an FHA loan, how long do I have to live in this property before refinancing? Want to do this legally.

Thank you,

@Nadir M. I believe you can refinance after 6 months provided you have the equity to do so. For the FHA program you are supposed to owner occupy for a year though. If you can actually force the appreciation sooner I think you can go right to a conventional loan (at least in theory), at which point you could move out and use the FHA loan again. You are right not to look to fake the owner occupied part.

Originally posted by @Nadir M. :

@John Warren

Thank you. Can I just use conventional instead of FHA to obtain the property?

You can look at using the HomePossible loan to purchase a duplex as well. It has to be your first property though to be able to use it. 

With any refinance on a property you're living in be aware that if you refinance you restart the owner occupancy requirement of 1 year if you get another owner occupancy loan. 

@Dan Mackin

That’s interesting and I did not know that. So if I live in a property for more than one year, I won’t refinance if I decide to buy another owner occupied. What’s that mean in the future if I do decide to refinance?

@Nadir M. a refinance is never a requirement. People do it for all sorts of different reasons. Some do it to pull some rehab cash back out that they put it in, others do it for a better rate or to remove the PMI they had on the loan. Some hackers purchase with an FHA loan then refinance into a conventional so that they have the FHA loan available again to purchase another property.

If you want to refinance after leaving the property you will likely have to use a non-owner occupant loan which will come with usually higher interest rates and a higher required percentage of equity.

Basically almost every owner occupied loan only requires you live in the property for 1 year. After that you can move whenever you want. No need to refinance if you don't need to.

Personally, if you can come up with the capital to do it, I would go with a conventional loan in the first place. This will tie up your money, but it will let you cash out sooner than an FHA would. I believe the national rule for FHA is at least 1 year in the property. If you can save money faster, then I would say try to save up another down payment and pick up another multi-family unit within the year and keep going. Best of luck!

@Nadir M. the big issue people are having now is that the home possible loan was changed this year to make it much harder to buy an income property with. The 5% down conventional was my loan of choice all the way up until July when the regulations behind it changed. I am still hoping it comes back some day, but for now most of my clients are doing FHA to take advantage of the 3.5% down. Conventional works fine as long as you don't mind bringing 15-25% down.

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