You can rent out your house with a mortgage, but your loan almost certainly requires you to live in the home first, usually for at least one year. After that occupancy period, most conventional, FHA, and VA loans let you move out and rent the property without special permission, as long as you update your insurance and respect any limits on short-term rentals. Renting earlier than that, without written approval from your servicer, can breach the loan and expose you to acceleration or fraud claims.
The One-Year Occupancy Rule
If you financed the home with a conventional loan, your contract almost certainly uses the Fannie Mae/Freddie Mac Uniform Security Instrument, the standardized document behind most U.S. residential mortgages since the 1970s.1Fannie Mae. Uniform Instruments That instrument contains an occupancy clause. It requires you to move in within 60 days of closing, establish the home as your principal residence, and keep it that way for at least one year.
Lenders write this into the loan because owner-occupied homes carry less risk. A borrower living in the property is more likely to keep paying through hard times than an investor managing tenants from a distance. Investment property loans reflect that risk with interest rates roughly 0.25% to 0.875% higher than owner-occupied rates. When you took the loan at the lower rate, the price assumed you would actually live there.
FHA and VA Loans Have Stricter Rules
Government-backed loans go further. FHA borrowers must occupy the property as their principal residence within 60 days of signing the security instrument and keep it that way for at least one year.2HUD.gov. FHA Single Family Housing Policy Handbook Under FHA rules, a principal residence is where you maintain your permanent home and spend the majority of the calendar year, and you can only have one at a time.3eCFR. 24 CFR Part 203 – Single Family Mortgage Insurance FHA will not insure more than one property as a principal residence per borrower, so you cannot buy a second FHA-financed home and rent out the first without meeting a specific exception.
VA rules are similar. Federal law requires veterans to certify at application and closing that they intend to personally occupy the home, and to actually move in within a reasonable time after closing.4Office of the Law Revision Counsel. 38 USC 3704 – Restrictions on Loans VA lenders generally read “reasonable time” as 60 days, with an expectation of 12 months of occupancy.
The Multi-Unit Exception
If you bought a two- to four-unit building with an FHA or VA loan and live in one of the units, you can rent out the others immediately. Living in one unit satisfies the occupancy requirement, and the remaining units count as rental income from day one.2HUD.gov. FHA Single Family Housing Policy Handbook
FHA even lets you count projected rent from the non-owner-occupied units when qualifying for the loan. For three- and four-unit properties, FHA requires the estimated rent from all units (including yours) to cover the full monthly payment, applying a 25% vacancy-and-maintenance reduction to the projected rent.2HUD.gov. FHA Single Family Housing Policy Handbook
Renting After the Occupancy Period
Once you have lived in the home for the required period, usually one year, most conventional, FHA, and VA loans let you move out and rent the property without any special approval. The occupancy clause is satisfied. Your mortgage stays in place with the same interest rate and terms, and you do not need to refinance into an investment property loan just because you started renting.
The obligations that remain after that first year:
- Update your insurance to a landlord policy before the tenant moves in.
- Report rental income on your federal tax return.
- Comply with any local landlord licensing requirements.
- Check your HOA governing documents. Some communities cap the share of homes that can be rented at once or impose minimum lease terms of six to twelve months.
Asking Your Lender for Early Permission
If you need to rent before the one-year mark, the right path is written consent from your loan servicer. Lenders will sometimes grant an exception when your circumstances change in a way that makes staying impractical. Common examples include military permanent change of station orders, an employer-directed job transfer to a distant location, or a significant increase in family size that makes the home inadequate.
Contact the loan servicing department listed on your monthly mortgage statement. You will generally need to provide:
- A letter of explanation describing why you can no longer live in the property, with dates and circumstances.
- Supporting documentation such as military orders, a signed job offer or transfer letter, or a lease or purchase agreement for your new residence.
- A copy of the lease you intend to sign with your tenant, showing rent, term, and tenant information.
Submit through the servicer’s online portal or by certified mail so you have proof of delivery. Some servicers use an internal consent-to-rent form that tracks the rental period and your new mailing address. Keep copies of everything. Do not sign a lease with a tenant until the written approval is in your hands.
Switching to a Landlord Insurance Policy
A standard homeowner’s policy (often an HO-3) covers owner-occupied homes and generally does not extend to a property occupied by tenants. Once you rent the home out, you need a landlord policy (commonly a DP-3), which covers the structure and your liability as a property owner. It does not cover your tenant’s belongings.
Landlord policies typically cost more than homeowner’s policies, with estimates commonly around 25% higher, because rented properties carry additional liability exposure. Notify your insurance company before the tenant moves in, not after. Your insurer will issue a new declarations page reflecting the change, which you then send to your mortgage servicer so your escrow account can be adjusted for the new premium.
If you skip this and the servicer discovers the coverage gap, it can buy force-placed insurance on your behalf and charge you for it. Force-placed policies cost significantly more than a policy you find yourself, and in many cases they protect only the lender’s interest in the property, not yours.5Consumer Financial Protection Bureau. What Can I Do if My Mortgage Lender or Servicer Is Charging Me for Force-Placed Homeowner’s Insurance?
Short-Term Rentals Are a Separate Question
Even after the occupancy period passes, most mortgages and lender consent-to-rent approvals restrict short-term rentals through platforms like Airbnb or VRBO. Fannie Mae treats short-term rental units as commercial leases subject to separate income and underwriting requirements, and limits them to no more than 5% of units in a property.6Fannie Mae. Short Term Rentals If your servicer approved a rental, that approval likely assumes a traditional long-term lease. Listing the home for nightly or weekly stays without confirming that your lender and insurer both allow it can put you in breach of the mortgage and void your landlord policy.
What Changes on Your Taxes
Renting the home out triggers federal tax consequences that follow you into every year you rent and into the eventual sale.
All rent you collect counts as taxable income in the year you receive it, including advance rent and any expenses your tenant pays on your behalf. You report rental income and deductible expenses on Schedule E of Form 1040. Security deposits are not income as long as you may need to return them, but any portion you keep because the tenant broke the lease or caused damage becomes income in the year you keep it.7Internal Revenue Service. Topic No. 414, Rental Income and Expenses Ordinary expenses such as repairs, management fees, insurance, and mortgage interest can be deducted against rental income, along with depreciation, which is often the largest write-off available to residential landlords. Residential rental property is depreciated using the straight-line method over 27.5 years.8Internal Revenue Service. Publication 527 (2025), Residential Rental Property
The sale side matters too. To use the Section 121 capital gains exclusion (up to $250,000 for single filers or $500,000 for joint filers), you must have owned and used the home as your principal residence for at least two of the five years before the sale.9Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence Rent the home for three years after moving out and you still qualify. Rent it for four and you do not. Any depreciation you claimed while the home was a rental must also be recaptured and taxed at a rate of up to 25% when you sell, even if the rest of the gain still qualifies for the exclusion.10Internal Revenue Service. Selling Your Home
What Happens If You Rent Without Permission
Breaking the occupancy rule exposes you to escalating penalties, and the fact that the loan is current is not a defense.
Loan Acceleration and Foreclosure
Most mortgages contain an acceleration clause that lets the lender declare the entire remaining balance due immediately if you breach the occupancy terms. The Fannie Mae/Freddie Mac Uniform Security Instrument requires the lender to give at least 30 days’ notice before acting.11Fannie Mae. Fannie Mae Single Family Uniform Instrument If you cannot pay the full balance in that window, the lender can start foreclosure proceedings even though you have not missed a payment. A foreclosure on that basis works like any other: you lose the home, your equity, and take a severe hit to your credit.
Mortgage Fraud
The most serious risk comes from the loan application itself. If you applied for an owner-occupied mortgage while planning to rent the property from the start, that is occupancy fraud, a form of mortgage fraud. Under federal law, knowingly making false statements on a loan application can bring fines up to $1,000,000, imprisonment for up to 30 years, or both.12Office of the Law Revision Counsel. 18 USC 1014 Even short of criminal prosecution, lenders who catch occupancy fraud can demand immediate repayment and report the breach to federal housing agencies, which can affect your ability to get government-backed financing later.