Understanding the occupancy requirement for FHA loans is essential when deciding if an FHA loan is the right choice for your financing needs. This article will provide an overview of the occupancy requirement and how it affects FHA loan eligibility.
The FHA requires that all borrowers purchasing a property with an FHA loan must live in the purchased property for at least a year (12 months) before the property can be refinanced or sold. This is referred to as the residency occupancy requirement. This requirement is unique to FHA loans, as other mortgage programs do not require that a borrower occupy the purchased property prior to refinancing or selling.
In order to qualify for an FHA loan, the buyer must demonstrate that they will use the property as their primary residence. The FHA will require a written statement, signed by both the buyer and seller, certifying that the property will be occupied as the borrower’s primary residence for the term of the loan. If the buyer does not meet this requirement, the FHA loan may be denied. The FHA also requires that the buyer must live in the property for at least 12 months before the property can be sold or refinanced.
One exception to the residency occupancy requirement is if the buyer is transferring from another FHA loan. In this case, the buyer may transfer without meeting the 12-month residency requirement. However, the FHA will still require a written statement from all parties involved in the transfer that states the buyer’s intent to remain in the property as the primary residence.
In addition to the residency occupancy requirement, the FHA also has certain restrictions on how long a borrower can stay in a property that is insured by an FHA loan. The homeowner must move out of the property within three years of the purchase date if they are unable to keep up with mortgage payments. If a homeowner must move out after the 3-year period, any resulting loss must be absorbed by the homeowner, not the FHA.
It is important that buyers understand the occupancy requirements prior to applying for an FHA loan. The residency occupancy requirements are essential for FHA loan qualification and failure to meet these requirements could result in denial of the loan application. Buyers should work closely with their loan officer to ensure the requirements are understood and met prior to applying for an FHA loan.
This article provides an overview of the residency occupancy requirement for FHA loans. FHA loan rules require all borrowers purchasing a property with an FHA loan to live in the purchased property for at least a year (12 months) prior to refinancing or selling. With some exceptions, such as when the buyer is transferring from another FHA loan, the buyer must provide a written statement certifying that they will use the property as their primary residence. The FHA also has a three-year time limit on how long a borrower can stay in a property that is insured by an FHA loan. It is important for potential buyers to understand these restrictions prior to applying for an FHA loan. Failure to meet the requirements could result in the loan being denied.
This article was contributed on Dec 06, 2023
