December 15, 2019

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FHA Mortgage Occupancy Rules

A reader asked us a question this weekend about FHA mortgage loan occupancy rules. “I purchased a home with an FHA loan and intended to live in it for 4 years until my fiancee got orders to relocate with the Air Force. Wellhe got orders to move from Colorado to Florida but I just purchased my house 3 months ago. Can I not leave Colorado and move with my fiancee?”

HUD 4000.1, the FHA single-family home loan rule book, addresses situations like these, stating:

“Borrowers who are military personnel, who cannot physically reside in a Property because they are on Active Duty, are still considered owner occupants and are eligible for maximum financing if a Family Member of the Borrower will occupy the subject Property as their Principal Residence, or the Borrower intends to occupy the subject Property upon discharge from military service.”

It does not elaborate further-if the reader purchased the home alone, without a military veteran or currently serving military co-borrower, the above may not necessarily apply for an FHA mortgage. (We’ll discuss that further in a moment). For those that do qualify for the above consideration, the lender will require documentation as discussed in HUD 4000.1:

“(b) Required Documentation

The Mortgagee must obtain a copy of the Borrowers military orders evidencing the Borrowers Active Duty status and that the duty station is more than 100 miles from the subject Property. The Mortgagee must obtain the Borrowers intent to occupy the subject Property upon discharge from military service, if a Family Member will not occupy the subject Property as their Principal Residence.”

For borrowers who, like the reader asking the question, where these rules might not apply, it’s best to have a discussion with the lender about what may or may not be permitted in cases like these depending on state law, lender standards, and the wording of your legally binding loan agreement.

If the reader intends to sell the property, there is no restriction on doing so except for the FHA loan rules that are set up to discourage the practice of flipping. Borrowers are free to sell the home they purchased with an FHA loan or have the loan assumed (with the participation of the lender). In general, as long as you’re selling the home after the first 90 days of ownership after the mortgage closing date, the anti-flipping rules will not affect your ability to sell the property.

Bruce Reichstein - Staff Writer

By Bruce Reichstein

April 10, 2017

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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