Switching to Landlord policy on Sub2 FHA Loan...

[agkatz]

Switching to Landlord Insurance policy on Sub2 deal with FHA Loan...

Wouldn't this alert the lender that the borrower is no longer occupying the house and likely accelerate the DOS clause?

Thanks,
- Adam.

[Admin]

Adam,
Most transactions don't require occupancy.  There are a few deals where the owners received grants, like with USDA loans, where there is an occupancy requirement and the grant and any subsidies are due and payable if the owner moves out, but this is not the case with most real estate transactions.

So, yes the lender's insurance department will know it's a rental, but that has no effect on the DOS unless there is an occupancy requirement.

It's a non-issue typically.

[agkatz]

It seems that the City of Austin first time buyer's loan that my seller got (which we were talking about on the phone) has an occupancy requirement.  

Is this standard contract languaging?  E-mail me privately if you feel this is sensitive information.

- Adam.

[Admin]

AK,
The few I've seen with downpayment assistance were very small amounts.  I don't recall any of them having occupancy requirements, but there was language about sales.

Even if there is an occupancy requirement, I think the risk would be small.  With rural areas there are inspectors who actually drive by annually to verify occupancy, but I doubt such a program exists in the city.

The first lienholder will not care about it.  It would be a good idea to read whatever you can regarding the repayment provisions for the downpayment assistance.

Changing insurance will not affect the subsidy repayment.  I would imagine the worst case would be that you'd have to repay it, but it certainly wouldn't stop me if everything else makes sense.

[Terry (Houston)]

I have not had any issues with the lender when placing a non-owner occupied policy in place.  Some of the loans have had the occupancy clause in there, but no issues so far.

Good luck,

Terry