Do You Have to Live in the House With an FHA Loan?
Considering an FHA loan? Understand the crucial owner-occupancy rule and how it applies to your primary residence for qualification.
FHA loans are government-insured mortgages designed to make homeownership more accessible for individuals and families. Provided by FHA-approved lenders, these loans offer more lenient credit and down payment requirements than conventional loans. A common question regarding FHA loans is whether a borrower must live in the home purchased, which involves specific occupancy requirements.
FHA Loan Occupancy Requirement
FHA loans promote owner-occupancy, meaning the borrower must intend to live in the property as their primary residence. This requirement ensures the program supports homeownership rather than facilitating the acquisition of investment properties. Borrowers are required to occupy the property within 60 days of signing the mortgage note.
Once occupied, the borrower must intend to continue living in the home for at least one year from the closing date. This one-year period emphasizes the FHA’s commitment to ensuring the property serves as a genuine primary residence. The FHA program is not intended for financing vacation homes, second homes, or properties primarily acquired for rental income, unless specific multi-unit rules are met.
Defining Principal Residence
A “principal residence” is the dwelling where the borrower maintains their permanent home and occupies for the majority of the calendar year. This means the property must genuinely serve as the borrower’s main home.
Lenders and the FHA consider various indicators to confirm a property is a principal residence. These include using the property address for voter registration, tax returns, utility bills, and a driver’s license. The intent to occupy is a key component, with borrowers certifying this on their Uniform Residential Loan Application. A person may only have one principal residence at any given time for FHA loan purposes.
Specific Occupancy Scenarios
FHA occupancy requirements allow for specific scenarios. Non-occupying co-borrowers can help a primary borrower qualify for a loan without living in the property themselves. However, at least one borrower on the loan must occupy the property as their primary residence. Their income and credit history are considered in the loan application.
Military personnel may receive exceptions to physical occupancy requirements due to active duty or deployment. If military orders prevent physical residency, a family member occupying the home, or the borrower’s intent to occupy upon discharge, can satisfy the requirement. For multi-unit properties, FHA loans permit the purchase of dwellings with up to four units. The borrower must occupy one of the units as their primary residence, while the remaining units can be rented out.
Maintaining Occupancy Compliance
Borrowers are obligated to maintain the property as their principal residence throughout the loan term, adhering to the terms outlined in their FHA loan agreement. This commitment is legally binding, and signing the loan agreement signifies consent to these occupancy conditions. The FHA’s emphasis on continued occupancy supports its mission of fostering homeownership and preventing the misuse of the program for speculative investments.
Lenders may conduct property inspections to verify occupancy status and ensure the property’s condition aligns with program standards. The borrower’s agreement to the terms is a continuous responsibility. Upholding these occupancy requirements ensures the integrity of the FHA loan and aligns with its purpose of providing affordable housing opportunities.