October 24, 2021

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FHA Loan Requirements For Occupancy: What The Rulebook Says

046When you want to purchase a home using a single-family FHA home loan, you should know what the FHA loan program’s requirements are for occupancy of the property. Did you know you are required as a borrower to certify you’ll use the home as your personal residence?

FHA loan rules in HUD 4155.1 explain these rules and how they apply to the borrower. There are many questions about occupancy including whether or not a borrower can purchase a single family home and rent out individual rooms, or whether a multi-unit property can be obtained and rented out.

Essentially, the FHA single-family home loan program rules state the following:

“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 FHA also has a definition of that phrase, principal residence. It reads as follows:

“A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.”

Another question relating to occupancy is whether or not the FHA will allow a borrower to have more than one FHA loan at a time. HUD 4155.1 Chapter Four addresses this question:

“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 FHA describes some of those situations as a change in family size, a job-related relocation, or in the case where a borrower leaves a jointly-owned property. This can apply in situations such as divorce, etc.

Finally, FHA loan rules also give this instruction to the lender:

“Under no circumstances may investors use the exceptions described in the table above to circumvent FHA’s ban on loans to private investors and acquire rental properties through purportedly purchasing “principal residences.”

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


Joe Wallace - Staff Writer

By Joe Wallace

May 23, 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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About FHANewsBlog.com
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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