What Does "Owner-Occupied" Mean?
October 22, 2025
Below, we examine some common topics on owner-occupancy and what you need to know before you sign on the dotted line.
FHA Loan Occupancy Rules
The requirement is divided into two parts. First, at least one borrower on the loan must move into the property within 60 days of the loan closing. Second, the borrower must certify at closing that they intend to occupy the property as their principal residence for at least one year (12 months).
Using an FHA loan for a Duplex or Multi-Unit Property
The FHA program allows borrowers to finance properties with one to four living units. The owner-occupancy rule still applies, meaning the borrower must live in one of the units as their principal residence. The other units may be legally rented out to tenants.
Co-Signers
Can a borrower have a co-signer who does not live in the home? Yes, this is known as a "non-occupying co-borrower." The rules for this depend on the co-borrower's relationship to you.
If the co-borrower is a family member (related by blood, marriage, or law), the FHA allows the standard minimum 3.5% down payment. If the co-borrower is not a family member, the FHA treats the loan as a higher risk. The loan-to-value (LTV) ratio is restricted to 75%, which requires a 25% down payment.
The FHA allows exceptions for certain unforeseen circumstances, provided the borrower can document them. These include:
- An involuntary job relocation to an area outside a reasonable commuting distance.
- A significant change in family size, such as the birth of a child, that makes the home too small.
- A severe illness, injury, or divorce that forces a move.
- Active-duty military service.
Knowingly misrepresenting your intent to occupy the property constitutes occupancy fraud, a form of mortgage fraud and a federal offense. If a borrower is caught, the lender can "call the loan," demanding the entire mortgage balance be paid in full immediately. This can lead to foreclosure, civil fines from HUD, and potential criminal charges.
FHA Loan Articles
July 30, 2026There is a common misconception about FHA loans that only a first-time home buyer can use the program. This is not true; repeat buyers can qualify for an FHA loan, but why does this misconception exist? Partially because state and local programs have first-time buyer requirements for down payment and/or closing cost assistance programs. So while you do not need to be a first-time buyer to get an FHA loan, you may need to meet that definition to qualify for down payment help.
July 29, 2026When you buy a home with an FHA mortgage, you have an option to apply for a cash-out refinance to take equity in your home out in cash. These loans are offered to those with 80% equity in the home or better, and you can apply for this type of cash-out refinancing once you hit that 80% mark. Many choose to wait until their equity is much higher to achieve the best results, and it pays to factor in your closing expenses and lender fees when running the numbers to assess how affordable this option is given your budget and financial goals.
July 28, 2026FHA loan rules require escrow, and the funds used to fund escrow must come from approved sources. FHA loan rules require the lender to verify funds for earnest money or closing costs and will not allow sources such as payday loans, credit card cash advances, or non-collateralized loans. If you have never opened an escrow account before, there are some important details to know before you start.
July 20, 2026Escrow accounts play a central role in managing property taxes and insurance for FHA mortgages. Understanding escrow accounts is an important part of being a new home owner, especially if you have plans to refinance the property at some point and want to know your options to get out of escrow. We examine some key points here about revising and canceling escrow on an FHA mortgage.
July 18, 2026Many home purchasers hold incorrect assumptions about FHA mortgage rules and restrictions. These loans are not limited to first-time buyers, for example, and there is no age limit for FHA loans. FHA borrowers may apply for more than one FHA mortgage, but these loans are for owner-occupied residences only. We examine some important points on these issues, including when you can and cannot have more than one FHA loan at a time.
