October 27, 2011
There are many frequently asked questions about FHA loans in connection with rental properties. Some borrowers purchase a home with an FHA insured mortgage and live there for a while, then decide to explore their options for renting the existing home out and purchasing a new one to live in.
One of the most common questions in this case has to do with qualifying income for a new FHA loan. “Can I rent my current home and use the income to qualify for a new FHA mortgage?”
According to the FHA official site, there was concern that borrowers might exaggerate the amount of rental income received on the first property. To address those concerns, the FHA instituted a new policy which took effect in late 2008. “Beginning with case number assignments on or after September 19, 2008, and until further notice, the underwriting analysis may not consider any rental income from the property being vacated” except under circumstances listed in the new rules.
Under the rules, rental income may be considered on the first property when the FHA loan applicant is “relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally recognized commuting distance.” In these cases there must be a “properly executed lease agreement (i.e., a lease signed by the homebuyer and the lessee) of at least one year
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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