If I Use An FHA Loan, Can I Rent My Home Out As An Investment Property?

Be careful renting out a home if you finance through a loan backed by the Federal Housing Administration. An FHA loan is meant to help people find homes to live in. It’s not supposed to help people purchase income properties. The agency prohibits homeowners from taking advantage of their program in order to build an investment portfolio.

Of course, that doesn’t mean it’s never allowed. The agency specifically outlines rules. For example, if you have to relocate to a new place outside of a reasonable commute to work, FHA may allow you to rent out a home financed through a loan backed by the agency. Additionally, if you have more children than your current house has room for, FHA makes an exception. Regardless though, you’d need to live in the home for most of the first year before considering renting it.

If you choose to rent out the home and they allow it, they might require you to wait to move out until the loan-to-value ratio is 75 percent. They might require a new appraisal too. Alternately, the agency might allow you to pay the loan down to that LTV in advance in order to move forward with rental plans if your family size grows.

Simply put though, the agency is aware than people may try to buy a home using an FHA loan with the intent to use it as a rental property and have provisions in place to make sure that doesn’t happen.

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