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FHA Loan Rules For Principal Residences

A recent reader question about FHA loan requirements for occupancy begs the question; what does the FHA consider a “principal residence” or “primary residence” and will the FHA approve of a second FHA mortgage for those who purchase single-family, owner-occupied property?

According to the FHA loan rules, found in HUD 4155.1, in the section titled “FHA-Insured Mortgages on Principal Residences and
Investment Properties” you’ll find the following:

“To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower.”

If you want to buy a home, this means the FHA expects you to use it AS a home. Additionally, “FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be insured will be the only one owned using FHA mortgage insurance.”

That basically defines the letter and spirit of the law when it comes to FHA home loans. In light of those rules, it’s easy to see why the FHA goes a step further;

“Any person individually or jointly owning a home covered by an FHA- insured mortgage in which ownership is maintained may not purchase another principal residence with FHA insurance, except in certain situations as described in HUD 4155.1 4.B.2.d.”

Consult with the FHA directly for information on circumstances that might be considered eligible for an exception to these FHA loan rules.

Do you have questions about the FHA loan process? Ask us in the comments section.

Joe Wallace - Staff Writer

By Joe Wallace

September 26, 2012

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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