October 26, 2021

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FHA Loan Reader Questions: Refinancing Loans and Occupancy

091A reader asks, “We have a home for 25 years paid the first mortgage off and the we got a home equality line now ten years are up and the loans and it need to be refinance and the bank said because we done live in the house but my daughter and her husband do that won’t give us the loan again. Can we just get another mortgage on the house I don’t want to lose our house.”

FHA loans for single-family residences do have an occupancy requirement–the borrower must live in the home as his or her “principle residence”. This is an important thing for FHA loan applicants to be aware of–FHA loan regulations include the borrower moving into the home and using it for the borrower’s personal use.

HUD 4155.1 Chapter Four Section B includes the following instructions to the lender about occupancy:

“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.”

The rules also define what the FHA expects in terms of using the home as the principal residence. “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.”

Furthermore, Chapter Four Section B states, “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. 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.”

However, the reader question doesn’t involve investment property–this may offer the reader an exception to the policy if a participating lender willing to work with the borrower can be found. From Chapter Four:

“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…” The “except in certain situations” part of that quote from the FHA loan rules is the key–speak to a loan officer about your needs in cases like these to see what may or may not qualify for an exception.

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

February 24, 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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