December 13, 2011
There are many reasons why a military member could choose to apply for an FHA insured home loan instead of applying for a VA mortgage. Those reasons may include occupancy issues, personal choice when considering FHA loan fee structures versus VA insured mortgage fees, etc.
The decision to purchase a home with an FHA mortgage instead of a VA loan could be influenced in part by language in the HUD document 4155.1, Mortgage Credit Analysis for Mortgage Insurance, which addresses occupancy issues. According to the VA official site Frequently Asked Questions list, occupancy rules for a VA Home Loan include a requirement that the veteran or spouse occupy the property bought with a VA insured loan as the primary residence:
“Q: I am a single veteran stationed overseas and want to buy a home in my home town. My friends who are married can do this with their spouses occupying the property in their place, but VA says I can’t do this with my parents or other relatives occupying on my behalf. Isn’t this discrimination against single veterans?
A: The law specifically provides that occupancy by the veteran’s spouse satisfies the personal occupancy requirement. The law makes no provision for occupancy by any other relatives as a substitute for personal occupancy by the veteran.” That Q&A can be found at http://www.benefits.va.gov/
But FHA loan rules are a bit more ambiguous–they still require the borrower to certify the home will be the primary residence, but also add the following as stated in 4155.1, Mortgage Credit Analysis for Mortgage Insurance:
“Military personnel are considered occupant-owners, and are eligible for maximum financing if a member of the immediate family will occupy the subject property as his/her principal residence, whether or not the military person is stationed elsewhere.”
This could provide an advantage for house hunters in the military who are re-assigned to another base but don’t want to relocate the family or give up their home. Of course, such issues are circumstantial and the FHA loan rules may not provide an advantage in every case. But the FHA rules mentioned here could definitely provide an alternative for some military borrowers.
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.
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