patrick.net

I know someone who had called their FHA loan servicing company and told them to switch mailing addresses as she will be moving.

They recalled the loan since it will no longer be owner occupied.

They will work with you to either sell the property or refinance. Kind of hard when the property is underwater.

If you will read all paperwork you can find that FHA loan is ONLY for owner occupied. I was thinking like this previously, but restriction on loan prohibits that switch. Don’t know yet about consequences but remember you dealing with government who goes by book.

It is interesting to see the rules. But it's a shame that they've put so much pressure on my sister whom lived on the property for 4 years. Nonetheless, she was able to refinance to an even lower rate after dropping in more money.

I wonder if there is any way to hold them accountable for their threats? We've got all their correspondences still.

I suppose you can try to fight this. We got it every other day, and in many cases, was via certified mail.

We just thought it was easier to refinance.

robertoaribas says

an FHA loan has lower rates/fees if you have mediocre credit.

I'm scratching my head over this one. *If* you are eligible for an FHA loan, why would you get a better rate if you have worse credit? Never heard this before. If you are comparing FHA to a standard conforming loan, then yes the FHA will offer a lower rate and the FHA program is typically used by individuals with low credit as they have no other options when it comes to home buying.

robertoaribas says

It has NEVER in my 15 years active in the business been a better loan for a buyer with A credit and 20% down. NEVER.

I should clarify my unique situation. I am a current homeowner and I am looking to purchase another larger home. After I purchase this 2nd home, I am also interested in purchasing a 3rd home for investment purposes. Let's look at some real numbers involving the 2nd home (I'm ignoring property tax for now as it will be the same for both loans below):

Assumed Purchase Price: $150,000

30yr Fixed loan (4.25% according to WF):
Down Payment (20%): $30,000
Loan Amount: $120,000
Mortgage/Mo: $590
PMI/Mo: $0
Total/mo: $590

30yr Fixed FHA Loan (4.00% according to WF):
Down Payment (3.5%): $5,250
Loan Amount: $144,750
Mortgage/Mo: $691
PMI/Mo (1.15% of loan / 12): $139
Total/Mo: $830

My monthly payment would be $240 more per month. However, the FHA's 3.5% down would free up cash for me to buy the 3rd investment property much sooner since I won't have 20% tied up in the 2nd house right off the bat. The 3rd investment property would obviously be a stanard 30yr fixed conforming loan.

What do you guys think?

vain says

We just thought it was easier to refinance.

Vain, you just threw me for a little loop with that letter, but let's take it a step further...

Say you purchase a home using an FHA loan where you put down 3.5%. You rent it out 6 months later and the bank requests that you refinance.

Do you just get a refinance for a 30yr conforming loan and you still own the house (or more appropriately, the rental) for only 3.5% down? Or was the bank wanting to see 80% LTV, and you needed to cover the rest with cash?

This is the type of stuff that scares me a bit with the FHA. At the same time, the letter seems completely unreasonable saying "requires owner to occupany for the life of the loan" You have got to be kidding me...

Lastly, you received that letter how long after purchasing the property and how long did you occupy it?
Thanks
Luke

She bought in a targetted area. Their 30 fixed year loans are FHA loans.

http://www.calhfa.ca.gov/homebuyer/programs/index.htm

Thank you for the reply everyone.

Mental Note: Stay away from CalFHA.

Vain, for my own reference, where did your CalFHA originate from and did you know you were getting a CalFHA loan or was this a surprise to you after the fact?
Thanks
BayArea

BayArea says

Vain, for my own reference, where did your CalFHA originate from and did you know you were getting a CalFHA loan or was this a surprise to you after the fact?

Thanks

BayArea

Was thru an individual broker referred by the buyer agent. She had no idea she was getting a CalHFA loan.

Not really sure what assistance she needed from them. She went in with close to 50% down. Might have been a better interest rate at the time?

You must live in it for two years before you can rent it.
And you're already in violation of an FHA loan. They are not for future landlords. But the FHA does recognize thing in people's lives change.
But going in, they wont loan to you it, your plan all along is to brownstone it. The PMI on FHA loans after 2011 stay on for the life of the mortgage and have gone up from $77 average to about $225 a month.

:-)

I live in NYS and am looking to purchase a 2 unit house. My son and his family would live in one unit and I would rent out the other. I qualify for an FHA loan, however, I was not planning on residing there. So I am assuming this would disqualify me before I even start, correct