Can You Use an FHA Loan for a Secondary Residence?

FHA loans play a significant role in making homeownership more accessible, particularly for individuals who may not qualify for conventional mortgages due to lower credit scores or smaller down payments. FHA loans are specifically designed for primary residences, not for secondary homes or investment properties.

FHA’s Primary Purpose: Owner-Occupancy

A fundamental requirement for properties financed with an FHA loan is that they must be owner-occupied. This means the borrower intends to live in the property as their principal residence.

The owner-occupancy rule serves to prevent individuals from using the program’s benefits, such as lower down payments and flexible credit requirements, for speculative real estate ventures. Unlike some conventional mortgage products that may finance secondary residences or rental properties, FHA loans maintain a strict focus on the borrower’s personal dwelling. This commitment to owner-occupancy is a core principle embedded within FHA regulations.

Defining FHA Primary Residence Requirements

For a property to qualify as a primary residence under FHA guidelines, the borrower must demonstrate a clear intent to occupy the property, typically by moving in within 60 days of the loan closing date. Furthermore, the borrower is generally expected to reside in the home for at least one year from the date of closing.

An FHA loan can also be utilized for multi-unit properties, specifically those containing up to four units. In such cases, the borrower must occupy one of the units as their primary residence. The remaining units can then be rented out.

FHA and Multiple Property Ownership

While FHA loans are strictly for primary residences, if a borrower initially used an FHA loan for their primary residence and later moves out, converting the property into a rental or secondary home, this is generally permissible after fulfilling the initial occupancy requirements. Typically, after residing in the FHA-financed home for at least one year, borrowers may convert it to a rental property without violating FHA guidelines.

Obtaining a second FHA loan is possible, but only under very limited and specific exceptions, as FHA generally restricts borrowers to one FHA loan at a time. These exceptions often include relocation due to employment, particularly if the new job is more than 100 miles from the current FHA-financed home, or an increase in family size that necessitates a larger residence. Another exception may apply if a co-borrower vacates a jointly owned property. In cases where a borrower with an existing FHA loan wishes to purchase a true secondary residence or an investment property, they would need to seek conventional or other non-FHA financing options.