October 14, 2014
A reader asks, “What is the maximum commuting distance allowed for a FHA financed primary residence?”
This question doesn’t have a set answer, since the FHA does not spell out an exact mileage amount or specific driving time that would meet or exceed the notion of “reasonable commuting distance”. Let’s examine what the FHA loan rulebook, HUD 4155.1 Chapter Four Section B has to say about reasonable commuting distances.
The information below is presented in the context of advising the lender on what is appropriate if an FHA borrower wishes to apply for a second FHA loan for the purpose of getting another home. This is generally not allowed, but exceptions can are are granted for increases of family size or a job relocation.
From HUD 4155.1 Chapter Four:
“A borrower may be eligible to obtain another FHA-insured mortgage without being required to sell an existing property covered by an FHA-insured mortgage if the borrower is
–relocating, and
–establishing residency in an area outside reasonable commuting distance from his/her current principal residence.
If the borrower subsequently returns to the area where he/she owns a property with an FHA-insured mortgage, he/she is not required to re-establish primary residency in that property in order to be eligible for another FHA-insured mortgage. Note: The relocation need not be employer-mandated to qualify for this exception.”
FHA loan rules may include requirements for reasonable commuting distances in other sections of the loan rulebook as well, but in all cases it’s important to understand why these rules are there in the first place. According to the FHA loan rulebook, the lender is instructed:
“Under no circumstances may investors use the exceptions described in the table above to circumvent FHA’s ban on loans to private investors and acquire rental properties through purportedly purchasing ‘principal residences.'”
As implied above, FHA loan rules can have exceptions provided for legitimate need-based FHA loans for a second residence. But FHA loan rules are designed to prevent single family home loans from being used for business purposes or investment purposes.
Do you have questions about FHA loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
Browse by Date: