WHAT HAPPENS TO AN FHA LOAN WHEN YOU MOVE FROM A HOUSE TO AN APARTMENT?

What happens to an FHA loan when you move from a residence to an apartment? Can you get out of your FHA loan and get the worth you’ve put in to it (principal) out? How does this work? Sorry, I’m brand new to this total loan process. 🙂
I am not foreclosing. I am now in an FHA loan, and am refinancing for a reduce monthly remuneration (with shutting costs paid by the bank). I only wondered what would occur if in a couple of years if I motionless to downgrade.

{ 4 comments }

Frank January 14, 2014 at 1:58 pm

Here’s the simple version: Don’t buy a house unless you will live in it for at least 5 years.

Here’s the slightly longer version: Get some help from someone who can talk to you directly, because you so completely misunderstand the purchasing process that I’m very concerned that you are going to end up in a bad situation with your purchase.

Here’s the much longer version: Let’s say you buy a house for $100,000. That’s 100k. (k=thousand). Your closing costs will be about 5k. Those are the costs to buy the house. (Lawyer, inspector, etc.) So you need to pay 105k to buy the house. You put down 10k down payment. You get a loan for 95k. (95+10 = 105)

Over the next 5 years, you pay your monthly mortgage bill. Most of this money goes toward paying interest on the loan, so your loan balance (the amount you owe) doesn’t decrease much. So after 5 years, you owe about 90k.

You decide you want to live in an apartment. You sell the house for 100k. About 8k goes to the realtor and for closing costs. So you get 92k (100-8=92).
The bank takes 90k to pay off the loan, leaving you with 2k. Two thousand dollars.

Did I mention that during those 5 years, you are paying for all repairs to the house out of your own pocket?

Let’s say you don’t keep the house up so well. You sell the house for 95k. 8k to realtor and closing costs, leaving 87k (95-8=87)

The bank takes that money and wants an extra 3 thousand from you to close the loan, or they won’t let the deal go through. You owe 90k, and with 87k net from the sale, that leave 3k for you to pay.

A Hunch January 14, 2014 at 2:10 pm

Your question is missing a lot of information.
An FHA loan is for the purchase of a home.

If you don’t live there but plan to keep the home (you can’t rent an FHA loan), you would need to continue paying the loan. Otherwise, you would need to sell the home and pay off the loan. If that is not done the lender will foreclose on you.

bull_rooster_aardvark January 14, 2014 at 3:06 pm

As with any loan, when you sell your house you pay off the loan with the proceeds of the sale and you get to keep whatever is left over. If (as happens a bit these days) the loan is more than the proceeds then you either have to pay the difference out of your own pocket, or get the bank to agree to waive the difference which they hate to do (as in a short sale). FHA is no different from other loans in this regard.

corduroy-fire-kills-7 January 14, 2014 at 3:53 pm

You can’t “get out” of your loan and just walk away and expect them to mail you a check for your equity . If you walk away, the bank will foreclose, which requires attorney fees that are generally assessed back to you or against any value you have in the property. When you walk away, you walk away from everything, including any value/principal in the property.

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