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.