If you are concerned about your ability to qualify for a conventional mortgage, an FHA loan can be a great option. FHA mortgages are popular among first-time home buyers and people with less than perfect credit. This is because the down payment and credit score requirements are more relaxed. But what about rental properties? Can you get an FHA mortgage if you want to rent out your home? Below, we’ve discussed the matter in detail.
Can I Rent Out Properties Bought with an FHA Loan?
There are residency requirements when you purchase a home with an FHA loan. You won’t be able to buy the property and rent it out right away. You will be required to move into the property within 60 days of closing and reside in it for at least one year. There are stiff penalties if you choose to ignore these requirements. However, there are still ways to rent out the property:
- After living in the home for one year, FHA allows you to rent out the property.
- Purchase a multifamily unit. As long as you live in one of the units, you can rent out the rest. FHA loans allow you to purchase multifamily complexes with up to four units.
- Special circumstances allow you to rent out the property if you suddenly need to move, or have a new family member.
What is the Difference Between an FHA Loan and a Conventional Loan, and Can I Rent Out Right away?
FHA loans offer benefits to help buyers who would typically have trouble getting a mortgage. They are designed to help out first-time home buyers, and buyers with lower credit scores. The most significant advantage to a traditional loan is that you can rent the home right away. That being said, some of the differences include:
- Credit score requirements are lower for FHA loans than traditional loans.
- FHA loans may have closing costs that traditional loans do not.
- The down payment requirement for FHA loans is at least 3.5% if your credit score is higher than 580. If you fall into the 500 to 579 range, you will need to put down 10%.
- One drawback of FHA loans is they require mortgage insurance regardless of your down payment amount.
- The FHA limits the amount of the loan you can get. $356,362 is the limit in low-cost areas, and $822,375 is the limit in more expensive areas.
Apply for an FHA Loan Today
Here at Mortgage Solutions Financial, we are dedicated to helping you get the home you deserve. We help home buyers with every aspect of the lending process, from obtaining a pre-approval letter to making sure they are financially ready to purchase a home. Contact our office today to begin the process of applying for an FHA loan.