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FHA Loan Questions About Occupancy Rules

104What are the FHA home loan rules for occupancy? A reader got in touch with us recently with a question that pertains to this important issue, asking, “I live in California, but I want to purchase a home in Virginia Beach, Va. Can I still use FHA loan to purchase a home in Virginia. My son will be living at the house that Im planning to purchase. He lives and works in Virginia.”

FHA loan rules that govern this issue can be found on page 135 of HUD 4000.1. FHA home loans are intended for borrowers purchasing principal residences, but what does that term mean? HUD 4000.1 has a specific definition of a “principal residence” on page 135, which states:

“A Principal Residence refers to a dwelling where the Borrower maintains or will maintain their permanent place of abode, and which the Borrower typically occupies or will occupy for the majority of the calendar year. A person may have only one Principal Residence at any one time.”

With respect to the reader’s question, FHA loan rules state:

“At least one Borrower must occupy the Property within 60 Days of signing the security instrument and intend to continue occupancy for at least one year.” Furthermore, FHA loan rules also add, “203(k) Rehabilitation products may have different requirements for the length of time to occupy the Property”.

The situation that is described in the reader question would not be permitted unless both people mentioned in the question-the parent and the son-were obligated on the FHA loan together. A non-occupying co-borrower situation is permitted by FHA home loans, but a situation where a single borrower purchases a home as an absentee owner would not be allowed.

Furthermore, FHA loan rules state that borrowers who already have a principal residence and want to purchase a home with an FHA mortgage would have to make the new purchase property their principal residence.

This is to prevent borrowers from using FHA mortgages to purchase investment properties, or buy a home to rent out to another person. According to HUD 4000.1, “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.”

In situations like the one mentioned in the reader question above, it’s best to discuss options with the lender that include a non-occupying co-borrower. Depending on circumstances, a higher down payment may be required in such cases, but there may be exceptions for family members borrowing together.

Do you work in residential real estate? You should know about the free tool offered by It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:

Bruce Reichstein - FHA News Author

By Bruce Reichstein

July 26, 2016

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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About 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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