November 21, 2016
Do FHA loans favor first time borrowers? How do occupancy rules affect the FHA mortgage transaction? These issues are key in a recent reader question we answered in the comments section.
A reader asks, ” I have never purchased a home and would like to purchase a Town House in Pompano Beach, FL located minutes from both of (family’s) places of employment and continue visiting with them as long as I like. We can share the mortgage cost and living expenses in Florida and I can keep the home that was gifted to me here in Detroit, MI. until it sells at a decent price. They will inherit all that I have and have invested in upon my demise so how can I qualify for an FHA first time buyer loan to get this 3 bedroom newly constructed townhouse? Is it possible?”
The FHA loan program in and of itself does not specifically offer any advantage to a first time home buyer. That does not mean that a lender won’t do so, but the FHA loan rules don’t have a first time buyer requirement, benefit, or restriction.
Borrowers may find a lender or local program specifically made for the first time buyer, but that would be offered independently of the basic requirements of an FHA mortgage.
The real issue in this reader question is one of occupancy. According to HUD 4000.1, at least one borrower obligated on the mortgage must take residence of the property, usually within 60 days of closing. FHA mortgage loans do allow for non-occupying co-borrowers, and certain conditions may apply.
As long as the FHA loan occupancy rules are satisfied, and assuming the borrower(s) are otherwise financially qualified, an FHA mortgage loan may be possible in the circumstances. Lender standards may also apply.
The reader question didn’t specify where the borrower’s official place of residence would be for purposes of the FHA loan application, but this can be a factor in home loan applications depending on circumstances. The lender will review such circumstances on a case-by-case basis, so it’s impossible to provide a blanket answer for all situations.
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 FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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