With FHA loans, can I rent out my current town home even if I enter into an additional housing loan?

With FHA loans, can I rent out my current town home even if I enter into an additional housing loan?
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#1

I have an FHA housing loan for a town home purchased in 2011. I may have the opportunity to purchase another house in the next few years.


#2

Great question!  FHA types of mortgage loans are designed for owner occupants with low to moderate income who may only have the FHA required 3.5% down payment.  And being that FHA loans have an insurance guarantee to its lenders, in the event of a default, they highly prohibit folks from using FHA loans to build housing investment portfolios and typically discourage folks holding more than one FHA loan at one time.  In layman's terms they rarely allow somebody to rent out a non-owner occupied home that has an FHA mortgage.  With the couple exceptions being job relocation and/or family size growing beyond the capacity of the first home of course.  But even if they do grant somebody a 2nd FHA mortgage, or the ability to rent out an FHA home, for one of the above listed reasons...they may require that the first FHA property be at 75% LTV *(loan to value)...or have 25% equity in the property...before the 2nd FHA loan, or rental option, is approved.  Now...being that you've owned your townhome since 2011 and potentially paid some of the loan balance down while home prices have increased...you may be able to refinance that FHA loan into a Conventional Mortgage product...assuming you have at least 10% equity *(or 90% LTV) in the home.  With a new conventional mortgage on your townhome you would not face any of these FHA restrictions.  Hope you've found this information helpful.       


#3

Unless there is something specific in the loan doc that says you cannot rent out the home, I think you are in the clear. Would have to see the docs. Sometimes there is a time limitation, 2 years or so, before you can do this. But generally it is not a problem. Read the docs and see if there is anything that states you can't rent. Bet there isn't.


#4

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