Effective for all FHA case numbers assigned on and after September 19th 2008 to further notice.

A Borrower cannot use rental income to offset the payment on their departure residence without very specific and narrow exceptions.

The old guidelines when someone wanted to rent their current residence out to buy a new home, FHA guidelines permitted the Rental Income being used to offset the mortgage payment used in Debt-to-Income ratios.

FHA has released the mortgagee letter nationwide found here HUD LETTER

This is due from the simple fact that many homeowners have been found guilty of the "Buy and Bail" scam where the borrowers pretend to rent out their old house, buy a new house and foreclose on their old house regardless if it was actually being rented out or not.

FHA is now instituting a Temporary guideline until further investigations determine the correct measures.  This new guideline will re-enforce that the borrower has enough income to make BOTH mortgage payments without any rental income to back up.

The Final Verdict: This may kill a lot of deals out there and trust me I know, I have 2 in the works but will probably have to be re-structured or scrapped all together, but the Government is protecting their own assets and scams out there.  Who knows if this will be permanent or not but until then be aware of this change and talk to a professional mortgage expert in your area about alternatives.

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