June 3, 2020

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FHA Loan Occupancy Rules: A Reader Question


A reader asks, “With a FHA Arm 5/1 or Section 251 loan, how long do I have to live in the house before I can sell it?”

This may seem like a tricky question. FHA loan rules for single family home loans found in HUD 4155.1 do list occupancy requirements. According to Chapter Four:

“At least one borrower must occupy the property and sign the security instrument and the mortgage note in order for the property to be considered owner-occupied. FHA security instruments require a borrower to establish bona fide occupancy in a home as the borrower’s principal residence within 60 days of signing the security instrument, with continued occupancy for at least one year.”

But that rule says nothing about the borrower’s ability to sell the property. Borrowers are generally free to sell the home or even to have the loan assumed under FHA loan rules, but one thing is very important–most borrowers who have purchased homes today and wish to have an FHA loan assumed will need to work with the lender in order to do so.

Selling the property is generally permitted under FHA loan rules, but borrowers should contact the FHA directly at 1-800 CALL FHA to discuss their individual circumstances for further clarification.

If the reason for selling a home purchased with an ARM loan is to avoid the interest rate increases associated with such a loan, another option besides selling is available–refinancing with an FHA mortgage. This refinancing can be done as a Streamline FHA Refinance loan for qualified borrowers, or as an FHA cash-out refinancing loan for qualified applicants.

Borrowers are generally free to sell the property they purchase with an FHA guaranteed mortgage loan to a qualified buyer, but FHA occupancy rules must be observed as applicable. Borrowers who need more information on their specific circumstances should contact the FHA (see the number above) for personal assistance.

Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.


Joe Wallace - Staff Writer

By Joe Wallace

January 31, 2014

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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