Can You Rent With a FHA Loan?

An FHA loan is a mortgage loan insured by the Federal Housing Administration. That usually means the loan is guaranteed by the U.S. government. Because the FHA insures the loan, the agency can place its own rules for the loans that it backs. The FHA allows borrowers to rent their FHA home, but only under certain circumstances.

FHA’s Goal

The Federal Housing Administration and FHA loans were created to increase home ownership. Therefore the FHA only insures loans for people who mean to reside in the home as their main residence.

Main Home

When you shut your FHA loan then you must register a statement indicating you will occupy the home as your primary residence within 60 days after closing. If you don’t occupy the home within that period of time, are breaking up your signed statement. This could result in civil and criminal penalties.

One Year Occupancy

You clearly must move into your home immediately after closing, but FHA principles allow you to rent an FHA-insured home if you’ve lived in it for at least one year.

Mortgage Agreements

The FHA does not levy any specific restrictions or requirements for how to rent the home after one year. By way of example, the FHA does not require the rent you charge equal or surpass the mortgage payment, so theoretically you can rent the home for a reduction each month in case you wanted to. However, you must earn FHA mortgage payments. You don’t have any protection by asserting the tenant is late on rent payments.

Expert Insight

The FHA will let you obtain a second FHA home under certain circumstances, such as if you have to move for your family outgrows your current FHA home. However, to qualify for a new FHA loan you can only use the rental income on your old FHA home if you’ve at least 25 percent equity in the home. This could impact your choice whether to rent your old FHA home or sell it so you can qualify for a new FHA loan.

See related