February 19, 2016
We get many questions in the comments section about various aspects of FHA loan rules, including the nuances of the FHA loan occupancy requirements.
Here’s one of the latest: “I have a married couple that wants to purchase FHA the Husband is a stay at home Father the wife is the sole bread earner. The home they want to purchase is 3 hours from her employment. But the Husband and Son will be home all during the week and she will come home on weekends. Can that loan be approved? If so I need to show the underwriter because they want to deny the loan.”
In general FHA loans are intended for principal residences. FHA loan rules define a principal residence as, “…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.”
The rules in HUD 4000.1 state that at closing time, or soon thereafter, occupancy must be established. “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.” The home cannot, in general, be used as a secondary residence unless certain criteria can be met:
“Secondary Residences are only permitted with written approval from the Jurisdictional HOC after a determination that:
–the Borrower has no other Secondary Residence;
–the Secondary Residence will not be a Vacation Home or be otherwise used primarily for recreational purposes;
–the commuting distance to the Borrowers workplace creates an undue hardship on the Borrower and there is no affordable rental housing meeting the Borrowers needs within 100 miles of the Borrowers workplace; and
–the maximum mortgage amount is 85 percent of the lesser of the appraised value or sales price.”
As you can see there are some burdens of proof that would need to be provided to the lender in order for an FHA mortgage loan to be approved in cases like these. The basic occupancy issue here could be solved if the other full-time occupant (the husband) were to act as a co-borrower on the mortgage loan, but the reader question’s details make that seem unlikely.
Commuting distance, rental housing availability and other factors all make this an issue that would have to be handled on a case-by-case basis. Like so many other aspects of FHA home loans, there are many variables and it’s impossible to state definitively whether or not loan approval is possible.
The lender and borrower would need to work out the specifics in these cases to see what may be possible. It may be that a loan could be possible if the home were located closer to the borrower’s place of employment and the part-time residency issue were avoided altogether. Or it may be a matter of providing supporting documentation to try to convince the lender that the loan would meet FHA guidelines.
However, lender standards would also apply, FHA rules aren’t the only ones at work in situations like these–that’s important to remember when considering your options.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. 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:
http://www.fha.com/fha_loan_limits_widget
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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