Why FHA Loans Exist

• FHA loan programs that are serviced thought Fannie Mae, Freddie Mac, and other government agencies are designed to help individuals purchase a home for their own use. Successful applicants can put as little as 3 to 5 percent down and still get a mortgage with a low interest rate (loan limits apply). Credit history standards also are less strict. The programs are not designed to permit landlords the opportunity to purchase a guaranteed loan for an investment property.
  
  

Residency Requirement

• Before a homeowner can consider renting out his FHA-backed home, he must establish it as his residency. He must move in no later than 60 days of taking possession of the property (the close). Then, he must live in the property for a period not less than one year -- the clock starts running on the day the homeowner moves in. Once those requirements are met, the homeowner may rent out the home. Be advised that he will not be able to deduct the mortgage interest from his personal income taxes if the home is no longer his personal residence.
  
  

Exceptions

• If you rent out your FHA-backed home, then it becomes difficult for you to secure another FHA loan. However, there are two exceptions to this rule. The first exception occurs when the family grows beyond the size that the home can reasonably accommodate (the borrower must provide documentation). The second exception occurs if the homeowner takes a new job that requires a long commute. Documentation must be provided for this as well.
  
  

Risks

• The FHA does check periodically by region to verify that its loans are being secured by owner-occupied residences. Should a borrower attempt to circumvent these rules, she will be subject to a penalty; this penalty will be outlined in the mortgage agreement. In addition, the borrower will jeopardize her ability to further benefit from FHA programs if she defaults on this term. For example, FHA loan-holders earned more benefits during the housing crisis that began in 2007; these benefits include the ability to streamline refinance, a valuable opportunity for FHA loan-holders to save money on their homes.