October 1, 2015
One common question many potential borrowers have about FHA mortgage loans has to do with the FHA’s occupancy requirement. One reader asked us recently, “What is the definition of Occupancy defined by FHA? Does using the space as an office suffice?”
FHA single family home loans are only for residential purposes. Borrowers are permitted to use a portion of the property they buy with an FHA loan for business purposes, but the non-residential use of the property cannot exceed 25% of the total floor space of the home.
FHA loan occupancy requirements state that the borrower must intend to use the home as the primary residence for at least one year. That means the borrower must move in and take possession of the property within a reasonable amount of time.
FHA loan rules are designed to prevent a borrower from using an FHA single family mortgage as a means to purchase investment property.
So basically, the short answer to this reader question is, occupancy is defined as using the home as your main residence. You cannot use the property as “office space” and meet the FHA occupancy requirement as defined in HUD 4000.1.
For more information on the FHA/HUD occupancy requirement, you can review the rules as found in the new HUD Single Family Loan Policy Handbook:http://portal.hud.gov/hudportal/documents/huddoc?id=40001HSGH.pdf.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It’s designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those websites.
It’s 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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