Over the years I have helped dozens of people buy a nice little house that would make a great rental. Their plan was to live there a few months or years and then buy a second house. They would rent out the first one and live in the second one. Some even purchased a third or even a fourth home, turning all the previous ones into rentals. Quite a neat way to end up with some investment property, huh?
I'm afraid those days are over. About a year and a half ago FHA started checking to see if a buyer had obtained an owner-occupied loan in the previous 12 months. In fact, one of my clients ended up having the dubious honor of being the first to get shot down... at least as far as we know. They ended up having an owner-occupied loan on their rental and having to get an investor loan on their new residence! Now, when buying a second property and renting the first one, FHA makes a person qualify for both mortgages... not considering the income generated by the rental. WHY?
Glad you asked! It seems a lot of people who have good incomes and credit find, with the decline in property values, they are upside down on their homes. They owe more on their home than it's worth, so they buy a more modest home at the discounted prices we are experiencing and then... and then...they bolt! They quit making payments on the large expensive home and let the bank foreclose. They have a house so they figure it's worth ruining their credit for a few years for, say $50 or $100,000.
FHA has stopped the Buyers and Bolters. The problem is, they have also stopped the legitimate buyers who want to take advantage of the market and buy a larger place while prices are down and then rent their other home until the market improves.
Leave it to our government. They can't fix anything. They can only make things worse. Since they aren't allowed to use common sense, they can't determine who is legitimate and who is a bolter.
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