How long before I can reuse FHA after I close owner-occupied refi

Question

Hi all,

I had a quick question about owner-occupancy requirements.

I purchased my first duplex with an FHA loan.  I am currently in the middle of a refinance where I need at least 85% LTV to qualify for this Freddie Mac owner-occupant loan.  I think that I should be able to achieve this based on market rents and recent sales.

My question is... how long after my refinance is done can I move out and reuse my FHA for (hopefully) a four unit?  Do GSE's have different time requirements that I need to stay in the property than FHA does?  I believe FHA's rule is one year occupying the property.

Thanks all!

RIP Freddie Mac Home Possible 5% down conventional financing :(

Brad Sneckner · Answer

Account Closed Ok, then waiting the 1 year is pretty much a must. The one potential option (if you have 25% equity rather than 15%), is you could refinance your current duplex as an investment property, and purchase the 4-plex with the FHA owner-occupied. The caveat is that you would need to do these two transactions simultaneously and close them at the same time because you can't refi your primary residence as an investment if you live there.

You'd need a lender who's really on the ball.

Brad Sneckner · Answer

Hey Account Closed,

Yes, assuming you would be completing this refinance as an owner-occupied property, then you are signing on the deed of trust saying you will occupy the property for at least 12 months. There are occasions where, in the future (but less than 12 months) if something changes your circumstances (such as getting a new job that you can't commute to) then you can probably get away with moving, because your "intent" at the time of the refinance was authentic.

But this is the most common type of mortgage fraud (when done intentionally), so mortgage companies and the FBI watch for this pretty closely.

Would you want to purchase the 4-plex in your same town/city?

Account Closed · Answer

Thanks for the reply, Brad!  I definitely don't want to commit mortgage fraud.  If Freddie's rule is one year, then I will stay in it a full year, no problem.

Yes, it would be in the same city as I work full time here for my 9-5.