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FHA Home Loans And Occupancy Requirements

May 15, 2018

FHA home loan occupancy requirements

What are the occupancy requirements for FHA home loans? Like many government backed loans, there are general occupancy requirements a borrower must follow as a condition of loan approval.

Whether you are buying an existing construction home or having one built for you using an FHA One Time Close construction loan, some guidelines for occupancy will apply.

FHA Definition Of Occupancy, Principal Residences

FHA loan occupancy rules basically require that the borrower live in the home full time, using it as the primary residence or principal residence instead of a vacation home, time share, or other intermittent occupancy arrangement. How does the FHA specifically define “principal residence”? According to HUD 4000.1:

“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.”

General FHA Loan Occupancy Requirements For Home Buyers

FHA loans require at least one borrower obligated on the mortgage to occupy the home as her permanent residence. The FHA loan program permits non-occupying co-borrowers, but you cannot be an absentee owner and allow others to live in the home in your place.

FHA borrowers who use an FHA mortgage to purchase a multi-unit property are permitted to occupy one or more units but rent out the unused units to others.

The key in these situations is that the borrower lives in the home and uses it as the principal residence.

Occupancy Rules For Veterans Buying Homes With FHA Mortgages

Some veterans might wish to purchase property with an FHA mortgage, but if a military member buys a home or uses an FHA construction loan to build, does getting deployed or reassigned affect the home owner’s occupancy status? The short answer is, no, FHA loan rules recognize the military member’s duty requirements as a temporary relocation rather than a permanent one.

According to HUD 4000.1:

“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.”

Note that the only requirement for military people on active duty who get called away from their principal residence is the intent to occupy once military service has ended-a very important rule to keep in mind.

That is quite different than the requirement for non military borrowers and provides a definite advantage.

Bruce Reichstein - FHA News Author

By Bruce Reichstein

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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