FHA Loan Requirements: Can I Rent Out My Home

by Debbie H. from Hayden, Idaho

Ask Kate about FHA owner occupancy requirements: Can I rent out my home? When Debbie bought a home, it was not disclosed that the neighbors' chain-smoking habits would prevent her from opening windows, enjoying the backyard, and most importantly, maintaining good health. She asks if FHA financing would prevent her from renting out her house less than one year after obtaining her mortgage.

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Health problems and Renting a Home With FHA Loan Less Than a Year Old

By Debbie H. from Hayden, Idaho
FHA Loan Requirements: Can I Rent Out My Home

Hi Kate, You have always been such a great resource! So here I am again.

We sold a house last June and bought this one with an FHA loan in early July after having a home inspection. It was not disclosed - and we did not know - that the neighbors were chain smokers. We have both been sick off and on since we moved in.

Even our dogs have both been hospitalized since moving into this house!

I was unable to spend one single day on our back porch, or even have windows or sliders opened because their cigarette smoke is so intense it comes straight onto the screened in back porch and into the house. Now that it is cold out, they still crack their windows, so it still creeps in here.

I know by law they have a right to smoke on their property, but I think we have a right not to have to inhale it all day. However, I also know their rights will trump ours. We live in a 55+ community. We just barely meet that criteria.

I had a heart attack last week and was hospitalized for several days receiving care.

Is there ANY way FHA will let us sell or rent this home when the sell date in less than a year, due to health reasons? I am not willing to die or stay completely closed up in this house for the rest of my life because of a neighbor's filthy habit. The way the houses are laid out, it is just a wind tunnel of second hand smoke.

I am already home bound and thought I would at least be able to enjoy the out doors in summer.

Thanks for your help!

***zz-portrait-left.shtml*** Ask Kate answers: Owner Occupied FHA Loan Requirements: Can I Rent Out My Home

Hi Debbie,

Even though it is nice to hear from you, I am sorry to hear of your circumstances.

Don't be too sure that the neighbors' right to smoke trumps your plight. Check into your state laws and county ordinances. For example, both Utah and California have statutes that protect against the nuisance and endangerment of secondhand smoke.

You could also look into the CC&Rs (covenants, conditions, and restrictions) that govern your housing development. A local attorney may offer free consultations where you could explore your rights to smoke-free air.

But back to your question about FHA guidelines.

FHA Owner Occupancy Requirements

When you signed final loan documents to buy your home, you acknowledged that you intended to move into the home within 60 days and live in the house as your primary residence for at least one year.

In other words, you confirmed your owner occupancy status based on guidelines structured to prevent investors from using the government-insured low down payment program to build up a portfolio of rental properties.

For the same reason, borrowers are generally allowed one FHA loan at a time. Of course, exceptions to the underwriting guidelines exist to accommodate the unexpected, for example, job transfers, an increase in family members, or a divorce.

Even so, FHA might require the homeowner to increase their equity by reducing the mortgage balance before granting a second FHA loan to the borrower.
Go here to read FHA Loan Requirements - Biggest Mistake People Make and learn more about this low down payment program.

Contact HUD, FHA, and Your Lender

But whether or not you would want a second FHA loan, don't rent out your property during the first year of FHA financing before obtaining written permission. HUD (United States Department of Urban Housing and Development) has been known to spot check homes within the first year to ensure the owner continues to occupy it.

This is why I suggest calling HUD at 800-333-4636, FHA (Federal Housing Administration) at 800-225-5342, and your lender to obtain written permission to rent out your owner occupied home that you financed less than a year ago.

As far as selling your home in the first year, I cannot imagine that this would be a problem. But I am not privy to your loan documents and cannot say for sure. You must defer to your written FHA owner occupancy agreement to determine that this has been addressed. Additionally, you can ask HUD and your lender to confirm this in writing.
Immediately after Tracy refinanced her owner occupied home with the FHA streamline program, she moved out the house and into her rental property. As I see it, she has a couple of choices. Read her story at FHA Streamline Refinance Occupancy Guideline.
Best wishes for a healthy 2015,

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