However, there are certain occupancy rules that must be met in order for the loan to be accepted. Generally, these rules require the borrower to live in the home as their primary residence for at least one year after the loan is finalized.
The occupancy rules for an FHA mortgage loan exist to protect both the borrower and the lender’s interests. Without these rules, someone could take out a loan with no intention of ever living in the home, leaving the lender with a huge risk. Additionally, the rules help ensure the borrower will be able to make their mortgage payments, as they are tied to the borrower's income.
There are a few exceptions to the one-year occupancy rule. The most common is when a borrower is transferring employment locations and needs to move into a new home right away. In this case, the FHA may waive the one-year occupancy requirement. However, the borrower must provide proof of their job situation when applying for the loan.
Another exception is if the borrower is in a home loan situation where they inherit a property or are taking over a borrower’s loan after the previous borrower defaults. In this case, the FHA may allow the borrower to keep the loan without living in the home, but only if the borrower has a legitimate and verifiable reason.
In addition to having to meet the one-year occupancy rule, borrowers also have to meet other requirements to be approved for an FHA mortgage loan. These other requirements include:
• A credit score of at least 580 (for most loans)
• Have proof of income
• Proof of employment
• A debt-to-income ratio (DTI) of no more than 43%
• Bank account statements
These requirements, in addition to the one-year occupancy rule, help lenders determine whether or not a borrower qualifies for an FHA loan.
In summary, FHA mortgage loans come with occupancy rules designed to protect both the borrower and lender. Generally, these rules require the borrower to live in the home as their primary residence for at least one year after the loan is finalized. Exceptions may be made in certain cases, such as when a borrower needs to move into a new home due to changing employment locations. Additionally, the borrower must meet other criteria to qualify for a loan, such as having a minimum credit score, proof of income, employment, a debt-to-income ratio of no more than 43%, and access to bank account statements. Fulfilling these criteria helps ensure a successful loan application for the borrower.
This article was contributed on Nov 17, 2023
