Articles Tagged With: FHA Occupancy Rules

What You Need To Know About Your FHA Home Loan

February 28, 2017

FHA Loan Rules On Occupancy And Second Homes

Occupancy is a key issue for FHA single family home loans. When you purchase a residence with an FHA mortgage, one of the requirements loan approval is conditional upon is that the borrower is expected to occupy the home as the primary residence, usually within 60 days of the loan closing. Occupancy is required for both new purchase and FHA cash-out refinancing loans. That’s one reason why FHA loan rules in HUD 4000.1 specify that FHA mortgages can’t be used for vacation properties, timeshares, etc. HUD 4000.1 states clearly, on page 135, the “standard for owner occupancy” which includes the following: “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. 203(k) Rehabilitation products | more...

November 21, 2016

Occupancy, and First Time Home Buyers

By Bruce Reichstein

Do FHA loans favor first time borrowers? How do occupancy rules affect the FHA mortgage transaction? These issues are key in a recent reader question we answered in the comments section. A reader asks, ” I have never purchased a home and would like to purchase a Town House in Pompano Beach, FL located minutes from both of (family’s) places of employment and continue visiting with them as long as I like. We can share the mortgage cost and living expenses in Florida and I can keep the home that was gifted to me here in Detroit, MI. until it sells at a decent price. They will inherit all that I have and have invested in upon my demise so how can I qualify for an FHA first time buyer | more...

November 10, 2016

FHA Condo Loans: Owner/Occupancy Requirements

By Bruce Reichstein

FHA loans include the option to fill out a loan application for condo loans. Borrowers can apply to purchase a condo unit as long as the condo project is either on the FHA approved list or is added to that list. Recently we reported on the FHA’s change in rules for occupancy requirements for approval of condo projects. According to an FHA mortgagee letter, “In accordance with the passage of the Housing Opportunity Through Modernization Act of 2016 (HOTMA), the Federal Housing Administration (FHA) is required to provide guidance on the percentage of owner occupied units required to obtain condominium project approval.” To be put on the approved FHA condo loan list, the project must meet specific requirements including an owner/occupier ratio. That ratio is addressed in that mortgagee letter | more...

October 20, 2016

FHA Requirements, Occupancy, and Business Loans

By Bruce Reichstein

Here’s an example of a question we get fairly often about the intended purposes of FHA mortgages: “I am interested in investing in properties I intend to flip and rent out. I already own a primary residence, can I use a FHA loan to buy a second home for business? FHA loan rules are specific when it comes to flipping a home, starting with the FHA’s definition of the practice as found in HUD 4000.1: “Property Flipping is indicative of a practice whereby recently acquired Property is resold for a considerable profit with an artificially inflated value, often abetted by a Mortgagees collusion with an Appraiser…Property Flipping refers to the purchase and subsequent resale of a Property in a short period of time..” We are not implying that the reader | more...

July 26, 2016

FHA Loan Questions About Occupancy Rules

By Bruce Reichstein

What are the FHA home loan rules for occupancy? A reader got in touch with us recently with a question that pertains to this important issue, asking, “I live in California, but I want to purchase a home in Virginia Beach, Va. Can I still use FHA loan to purchase a home in Virginia. My son will be living at the house that Im planning to purchase. He lives and works in Virginia.” FHA loan rules that govern this issue can be found on page 135 of HUD 4000.1. FHA home loans are intended for borrowers purchasing principal residences, but what does that term mean? HUD 4000.1 has a specific definition of a “principal residence” on page 135, which states: “A Principal Residence refers to a dwelling where the Borrower | more...

June 26, 2015

FHA Loan Occupancy Rules

By Bruce Reichstein

Some borrowers get in touch with us with questions about FHA loan occupancy rules. One of the most common questions about FHA loan occupancy requirements involves those who must travel for business, or who find themselves having to relocate to another state because of job issues. Are borrowers who spend less time at home than a typical home owner considered in violation of FHA mortgage loan occupancy rules? For example, the homeowner who now works and lives in another state but commutes home for the weekend? FHA loan rules require a borrower to take ownership of the home at closing time and use the home as the primary residence for at least one year after the closing date. The borrower can’t vacate the home and rent it out during this | more...

June 2, 2015

FHA Occupancy Requirements

By Bruce Reichstein

One common type of question we are often asked about FHA loan occupancy rules involves situations where the borrower wants to purchase the home for his or her primary residence, but may be gone for extended periods of time because of job-related travel. Some borrowers want to know if the FHA loan rules on occupancy specify a number of calendar days per year of occupancy, or if a spouse and children can fulfill the borrower’s occupancy requirement in his/her absence. FHA loan rules found in HUD 4155.1 Chapter Four Section B simply states, “A principal residence is a property that will be occupied by the borrower for the majority of the calendar year.” It may be at the lender’s discretion to determine what the minimum occupancy for the borrower might | more...

What happens to my FHA loan in a natural disaster?

May 16, 2015

FHA Loan Occupancy Rules: A Reader Question

By Bruce Reichstein

A reader asks, “Is there a time requirement of the purchaser for moving into a recently purchased home with an FHA loan? Also, can the purchaser have family members move into the recently purchased home (FHA loan) instead of the purchaser?” In general, FHA loan rules require the borrower to the an owner-occupier. FHA single family home loans are for principal residences only, so the borrower must certify that he or she is buying a home for personal use. Additionally there is an occupancy requirement–FHA loan rules state the borrower must move into the home and use it as the primary residence within two months of the loan closing date. This information is found in HUD 4155.1, Chapter Four Section B, titled, “Eligibility Requirements for Principal Residences”. It begins by | more...

April 8, 2015

FHA Loan FICO Requirements and Occupancy Rules: A Reader Question

By Joe Wallace

A reader asks, “I saw a home I liked far away in another state. I could very easily afford 20% down and also very easily afford the mortgage payments. My problem is that my FICO is probably too low for a conventional loan. I don’t want to be an investor. I just want to live in the house. I can not move to where the house is for two years and I assume it will be off the market by then.” “If I could get the home today, I would be just fine leaving it empty till I could move to that area. I’m pretty sure I could get an FHA loan except for the owner occupancy rule. I would never break the law, but I wonder if the FHA | more...

October 1, 2014

FHA Single-Family Home Loan Occupancy Rules

By Joe Wallace

FHA loan rules for single family home loans include an occupancy requirement. This requirement is designed to encourage single-family borrowers and exclude investors from using single-family FHA mortgage loans to purchase investment property. Why? The intent of the single-family home loan program is to help eligible borrowers get into affordable housing using a low-cost, lower-than-conventional loan interest rate. These rates are not intended to help investors buy property for non-occupying rental or outright sale. What are the FHA loan rules for occupancy? The full explanation of the rules can be found in HUD 4155.1 Chapter Four Section B, which starts off by defining what a “principal residence” is. A home purchased with a VA mortgage is required to be used as the principal residence, so it’s good to know what | more...