Expert: Jim Root - 10/15/2009

Question
I want to know it is true that after one year of having our FHA Hud loan if we can allow someone to else to live in our home and make all payments  if we change address and in the mean time they keep trying to assume our 100 % loan ? They are our good friends and we are not worried but if need be would make the payment for them. Is this legal

Answer
Hey, DUSTY--

If you bought your Home using FHA-Insured Financing (which is for "Owner/Occupans" ONLY) or Conventional Owner/Occupant (Rather than an "Investor Loan" at a higher rate & terms) BEFORE Closing you signed an Affadvit that CERTIFIED that you would MOVED INTO the Home within 30 days of Closing and INTENDED to use the Home as your PRIMARY RESIDENCE for at least ONE YEAR.Once the year has past,you can sell the Home or Rent it out and move on to another purchase or rent something for yourself.YOU"VE THEN SATISFIED THE "I-N-T-E-N-T" to be a Hmeowner, NOT an "Investor."

You can ALLOW someone else to live in your House WITH you over that first year and they could help with the expenses, but it WOULDN'T be wise to have them on a Lease or other Rental Agreement during that one year period. This MIGHT be misinterperated as FRAUD & lead to invstgation. I suggest you "pay it safe!"

AFTEr the year is up, your Friends could either Buy the Home from you OR you could rent it to them, or you could use a techique called "Lease with Option to Buy!" If they actually buy the Home from you,they CAN'T just assume yur loan .Your loan has a "Due ln Sale Clause" and either must be paid off by your Friend's NEW Mortgage OR thy MIGHT be abe to "assume" your Loan BUT they'd have to QUALIFY for it based on their Credit Scores, Income & Debts, etc.

With a "Lease Option" as they're somtimes called,you recieve rent from them at an amount sufficient to cover your Monthly Mortgage Paymeny & YOU make the payments on your existing loan for an agreed-upon length of time. Sometimes a part of the Rent is "escrowed" and used as the Buyer's Downpayment when/if the Option  is taken--or goes to the Seller if the Tenant elects not to take advantage of the Option to Buy.As in this case, you are the Landlord, they the Tenants until the time period is up. Then they have the OPTION of buying from you at a predetermined price OR the then-current market value. You SHOULD be able to help your Friends in several LEGAL ways.

I'M NOT AN ATTORNEY, NOR AM I STILL A LICENSED REALTOR, APPRAISER OR MOTGAGE BANKER, SO MY INFO ABOVE IS N-O-T TO BE CONSIDERED AS "LEGAL OPINION,ADVICE OR GUIDANCE." LEGALITY QUESTIONS SHOULD BE POSED TO A LOCAL LAWYER WHO SPECIALIZES IN REAL ESTATE,A LICENSED REAL ESTATE AGENT &/or A LICSNSED MORTGAGE LOAN BANKER/BROKER OR LOAN OFFICER/ORIGINATOR.

MY RESPONSES ARE "GENERIC" AND RESENTED AS EDUCATIONAL, HOPING TO HELP YOU ASK THE RIGHT QUESTIONS OF THOSE LOCAL PROFESSIONALS WHO WITH ALL "SPECIFIC" DETALS OF YOUR CASE, SHOULD BE ABLE TO HELP YOU FURTHER.

By-the way, the above uppper case letters DON"T denote "yelling," but are only to emhasize
thestgatus lf my resp se and lur need flr further nqiries specific to you scenarikon--and form folks right there in your Home Town. GOOD LUCK, DUSTY!

--JIM ROOT