Does an FHA Loan Require Owner Occupancy?
Mortgage borrowers have various home loan options, and the best loan depends on the borrower's credit history and available cash. FHA mortgage loans do not require high down payments (about 3.5 percent), and borrowers can receive financing with only a 620 credit score. While easier to obtain than conventional mortgages, there are limits to what a borrower can do with FHA financing.
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What Is FHA?
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FHA mortgage loans are insured by the Federal Housing Administration. Because these loans are federally-insured, borrowers with less than ideal credit situations can obtain financing. Getting an FHA mortgage loan will involve applying with an FHA-approved mortgage lender. The U.S Department of Housing and Urban Development provides a list of FHA-approved mortgage lenders for each state. Additionally, you can acquire information on lenders approved to offer FHA mortgage loans by contacting a mortgage broker.
FHA and Owner Occupancy
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With conventional mortgage loans, borrowers can purchase a property and then decide to rent out this property. FHA mortgage loan requirements vary from conventional mortgage loans in several ways. Conventional loans typically require a 680 or higher credit score, as of 2011, and borrowers don't have to occupy the residence. FHA mortgage loans do not offer non-owner occupancy loans. Therefore, individuals can only apply for an FHA mortgage if they intend on living in the property.
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Cosigners and FHA
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Like other mortgage loans, FHA home loans do allow cosigners or co-borrowers on mortgage loans. Cosigners can help an applicant qualify for an FHA mortgage, and even help the borrower obtain a lower rate on the home loan. While primary borrowers must occupy the residence, FHA will allow first-time buyers to have a non-occupant cosigner on the mortgage loan. Thus, someone applying for financing has the option of having a parent or other relative act as a cosigner on the loan agreement. This benefits buyers with a limited credit history or low credit score.
Other Requirements
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Prior to applying for an FHA mortgage loan, it's imperative to keep abreast of other requirements for financing. Aside from having a 3.5 percent down payment and maintaining a minimum credit score of 620, anyone applying for an FHA mortgage loan must be able to provide proof of steady employment with at least 24 months of pay stubs or a tax return, and applicants must allow two and three years to lapse since a bankruptcy or foreclosure, respectively.
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