UPDATED: October 26, 2022

Can I rent my house with a conventional loan? Yes, you can. But before you put up the “For Rent” sign, you need to make sure it’s allowed on your mortgage.

When you take out a mortgage, the lender needs to know how you plan to use the property. You have to be honest and upfront about your intentions if you don’t want to be accused of occupancy fraud. It’s a type of mortgage fraud wherein you lie to your lender about the occupancy status of your property.

If you stated in your mortgage agreement that you’ll be occupying the house and later on decided that you want to rent it out, the lender has the right to know about this before you carry it out. You need to get in touch with your lender and discuss your plans so that you’ll know if you’ll be permitted or not.

Some lenders will permit you without changing anything on your mortgage rate or terms. Others will grant permission but for a specific time only, require you to refinance your mortgage, or ask you to pay an additional charge to your current mortgage. A mortgage company may also call the note due as soon as the rental begins. This means you may have to refinance your mortgage at a higher interest rate.

Other loan programs, such as those backed by the government (e.g., FHA loans or USDA loans) have restrictions. They include requiring the owner to occupy the house for at least one year before renting out your primary residence after purchase.

Some people think that there are fewer restrictions for homes with conventional loans because they don’t follow government-mandated guidelines. But that’s not the case. Conventional loans can have more restrictions.

How Long Do You Have to Live in a Primary Residence Before Renting?

Conventional loans that are guaranteed by Fannie Mae or Freddie Mac will require you to live in the house for one year or more before you can rent it out. Lenders may also have other restrictions on the use of the property, so it’s better to call them first before renting out your home.

Can I Rent Out My House Without Telling My Mortgage Lender?

Yes, you can. But you’ll probably be violating the terms of your loan agreement, which could lead to penalties and immediate repayment of the entire loan. So before you decide to rent out your property, you must inform the lender first.

Do You Need to Tell Your Lender if You Want to Rent Out a Room in Your Home?

Yes. Even if you’re planning to rent out a room only, you still have to check your mortgage contract and consult with your lender. Some lenders allow such an arrangement while others have other requirements before they grant permission, such as purchasing additional insurance coverage.

What are the Restrictions for Renting Out Your Home With a Government-Backed Loan?

FHA Loans

Federal Housing Administration (FHA) loans are the most popular conventional loans for first-time homebuyers because of their lenient credit requirements and low down payment. If you purchased a house using an FHA loan, you have to live in the house for at least one year before you can rent it out. You may be allowed to sublet your property sooner if you’re facing extenuating circumstances such as moving out of state for work.

Don’t try to cheat by sneaking in a renter even if you haven’t met the one-year requirement because FHA conducts spot checks. If you do, you may be charged with occupancy fraud, which comes with serious legal repercussions.

You may be allowed to rent out spare bedrooms in your house or the spare units in your multi-family property as long as you live in the property, too.

USDA  Loans

USDA loans are home loans that are administered by the U.S. Department of Agriculture. There are two types of USDA loans, guaranteed loans, and direct loans.

When you take out a USDA loan, you are required to occupy the property personally. But if you have owned the property for at least three years, then you can use it as a rental. However, this only applies to a USDA guaranteed loan. A property with a USDA direct loan can’t be used as a rental. If you decide to rent your house, you will no longer be eligible for subsidy assistance and other servicing options. Since owner occupancy is a must, any payment subsidy you’re receiving will be canceled.

What are the Pros and Cons of Renting Out Your Home?

Renting out your house comes with several benefits, such as the following:

  • It lets you live elsewhere without having to pay for an unoccupied home.
  • It offers you an additional source of income.
  • It’s a good source of income if you can’t sell your house.

The disadvantages of renting out your house include the following:

  • You have to cover the costs of preparing your house for tenants.
  • You will be responsible for repairing and maintaining the rental property.
  • You need to accept that there are risks of property damage and missed rental payments.

What Do You Need to Do Before Renting a House With a Mortgage?

Renting out a house with a mortgage is more complicated than one without an existing loan. Here are some tips that you need to do before you start looking for tenants.

1. Research for Mortgage Restrictions

What kind of loan do you have? Whether it’s a conventional loan or a government-backed mortgage, check for restrictions for renting out your home. Read your loan agreement carefully to know if rentals are allowed or prohibited.

2. Talk to Your Lender

After doing your research and reading your loan agreement, talk to your lender about your plan to rent out your property. Your lender can explain the rental restrictions and requirements better.

3. Check Your HOA’s Rental Policy

Find out if your homeowner’s associations (HOA) allow or prohibit rentals in your neighborhood. HOAs may either prohibit rentals outright or place restrictions such as vetting the potential tenants. Some HOAs only allow a certain percentage of houses in the area to be used as rentals. While others allow rentals if the homeowner proves that they’re experiencing financial hardship. Knowing these rules will help you avoid getting fined.

4. Switch Your Insurance Policies

The insurance policy you have with an owner-occupied house won’t be enough when you turn your house into a rental property. Your current homeowner’s insurance policy won’t offer enough insurance coverage. Furthermore, your insurer may deny your claims especially if you’re misrepresenting yourself as the occupant of the house, when in fact you’re renting it out.

You should find a new insurance policy first before you put up your house for lease. You should get coverage that will protect you from loss or damage on the property and offer liability coverage in case your tenant gets hurt on your property.

5. Talk to a Real Estate Attorney

A real estate attorney will help you learn more about your responsibilities and liability as a landlord. They can offer you legal assistance as you transition from a homeowner to a landlord. They can create a lease agreement according to the policies and rules you want your tenants to follow. They can also guide you in meeting all legal requirements and in understanding the landlord-tenant law.

6. Learn About Landlord-Tenant Law

Before you rent out your house, you need to know what your responsibilities are as a landlord under the Fair Housing Law. Also, this will help you avoid getting in trouble for discriminating against potential tenants based on race and gender.

7. Plan the Property Management

How do you plan to manage your property? Who will take care of the repairs and maintenance? Who will collect rental payments? How involved do you want to be in managing your rental property? You should answer these questions before you put up your house for rent. If you don’t have the time or you’re far from the house, you should consider hiring a property manager.

8. Prepare Your Property for your Tenants

Check out the other rental properties in your area and find out what features, appliances, and amenities they offer. Hire a home inspector to check your property for any issue or defect. This will help you determine which ones need immediate repair and how much it’ll cost you.

Once you’re done, you can move out your personal items and prepare your house for your tenants. Don’t forget to clean the place thoroughly before staging it with the help of a real estate agent.

9. Know How Much You Need to Charge for Rent

Figure out how much you need to charge for renting your house. The cost should be in line with the rental price of other similar properties in your area. The rental amount must cover your mortgage payment, maintenance costs, and allow you to make some profit, too.

10. Find a Tenant

Once you’ve put your property up for rent, you’ll start receiving rental applications. Make sure that you already have an extensive tenant screening process set in place, which should include checking their credit report, current employment status, income, and status with past landlords.


You need to do some research if you’re thinking of converting primary residence to rental property mortgage to ensure that you’re not breaching your mortgage contract or breaking any law. Consult your mortgage company before you start looking for tenants so you won’t be accused of committing an illegal act like occupancy fraud. You also need to find out if there are any occupancy requirements or restrictions that you need to meet based on the type of loan you have. All these things will help you determine if renting out a primary residence right after purchase is possible or not.