FHA Principal Residence

What does the FHA consider investment property?

The principal residence is the property where an individual has lived for several years, has obtained voter’s registration, has the address on the driver license, and also pays the local or state taxes. It is also the place where the borrower of a mortgage lives for the majority of the period. If there are co-owners to the property, then at least one owner must stay on the property who should also be a co-borrower, and must sign the mortgage note for the property that it is considered as owner occupied.

The borrower must produce proof in the form of a driver’s license, proof of paying local taxes for the address, and must prove the occupancy in the home is the principal residence of the borrower within 60 days after the borrower signs a security instrument form. The borrower should also establish that they have been in continued occupancy of this address for a minimum period of one year.

In order to prevent circumvention of the restrictions for investors on FHA – insured mortgages they generally do not insure more than one mortgage for the principal residence for any borrower. Any person as an individual or jointly with another person, or entity- preferably who are the co owners of the house which is covered by the FHA insured mortgage, where the ownership is maintained will not be able to purchase another such principal residence with the same FHA mortgage insurance unless the situation described below arises.

The properties that have been acquired in the form of investment properties will not be subject to these restrictions. FHA does not insure mortgages that conclude that the transaction have been designed to use the FHA mortgage insurance that will be used as a vehicle to obtain investment properties. FHA does not encourage homeowners to use them as a tool to obtain several properties using this process. But FHA will not object to home buyers who wish to use FHA mortgage insurance to be used more than once if it is compatible with the needs of the home buyer and the resources of the home buyer as follows:

Relocation:

If the principal borrower staying in his primary residence is forced to relocate due to his work or any other valid circumstances or if the borrower is re-establishing the residency in another area that is not within the commuting distance from the current principal residence, then borrower would become eligible to obtain another mortgage using the FHA insured financing. The borrower will not be required to sell his existing principal residence, which the borrower was occupying and covered, by FHA insured mortgage. The reason for the relocation need not be due to the employer to qualify for this exemption. If the borrower returns back to the area where he/she owns a property that has an FHA – insured mortgage and lived earlier, it would not be required for the borrower to re-establish the primary residency in the same property to be eligible for yet another FHA – insured mortgage.