Borrower Residency Requirements

Yes, a non-occupying co-borrower can be used, but it affects the loan terms. A Non-Occupying Borrower Transaction involves borrowers where one or more will not occupy the property as their Principal Residence. Generally, the maximum Loan-to-Value (LTV) for such transactions is 75 percent. However, the LTV can be increased to a maximum of 96.5 percent if the borrowers are Family Members, provided the transaction does not involve a Family Member selling to a Family Member who will be a non-occupying co-borrower, or a transaction on a two- to four-unit property.

Lenders must determine residency status based on information in the mortgage application and supporting documentation. Crucially, a Social Security card is not sufficient to prove immigration or work status. For lawful permanent residents, the mortgage file must include evidence of this status, typically provided by U.S. Citizenship and Immigration Services (USCIS) within the Department of Homeland Security. For citizens of Micronesia, the Marshall Islands, or Palau, evidence of citizenship is required. The lender must ensure the documentation provided validates the borrower’s eligibility to participate in the program.

While FHA generally insures only one Principal Residence per borrower, exceptions exist for relocation. A borrower may be eligible to obtain another FHA-insured mortgage without selling their existing FHA-financed property if they are relocating or have relocated for an employment-related reason. To qualify, the borrower must establish a new Principal Residence in an area more than 100 miles from their current Principal Residence. If the borrower later moves back to the original area, they are not required to re-occupy the original house and may obtain a new FHA mortgage on a new home.

Borrowers who are military personnel on Active Duty are considered owner-occupants even if they cannot physically reside in the property due to their duty station. To qualify for maximum financing under this exception, a Family Member of the borrower must occupy the subject property as their Principal Residence, or the borrower must intend to occupy the property upon discharge from military service. The lender must obtain a copy of the borrower’s military orders evidencing Active Duty status and verifying that the duty station is more than 100 miles from the subject property.

Generally, investment properties—defined as properties not occupied by the borrower as a Principal or Secondary Residence—are not eligible for FHA insurance. The FHA will not insure a mortgage if the transaction is designed to use FHA insurance as a vehicle for obtaining investment properties, even if it is the only FHA loan the borrower has. However, exceptions exist for specific borrower types. HUD-approved nonprofit organizations, state and local government agencies, and Instrumentalities of Government may be eligible to finance investment properties under specific FHA programs.

FHA loans are generally not intended for vacation homes or recreational use. A Secondary Residence refers to a dwelling a borrower occupies in addition to their Principal Residence but for less than a majority of the calendar year. Secondary Residences are only permitted with written approval from the Jurisdictional Homeownership Center (HOC) under strict hardship conditions. The borrower must prove that the commuting distance to their workplace creates an undue hardship and that there is no affordable rental housing within 100 miles of the workplace. The maximum loan-to-value ratio for a secondary residence is 85 percent.

The FHA defines a Principal Residence as the dwelling where the borrower maintains or will maintain their permanent place of abode. To qualify as a Principal Residence, the borrower must typically occupy or intend to occupy the property for the majority of the calendar year. An individual can have only one Principal Residence at any one time. Furthermore, at least one borrower must occupy the property within 60 days of signing the security instrument and must intend to continue occupancy for at least one year. This distinguishes it from secondary or investment properties.

Beyond lawful permanent residents, the FHA extends eligibility to citizens of specific nations due to compacts with the United States. Specifically, a borrower with citizenship in the Federated States of Micronesia, the Republic of the Marshall Islands, or the Republic of Palau may be eligible for FHA-insured financing. These borrowers must satisfy the same requirements, terms, and conditions as U.S. citizens to qualify. For validation purposes, the mortgage file must include evidence of such citizenship. This provision allows these specific non-U.S. citizens to access FHA loan programs under standard citizen-level guidelines.

According to recent updates regarding FHA residency requirements, eligibility for non-permanent resident borrowers has been removed. Previously, FHA guidelines may have allowed for non-permanent residents under specific conditions, but current policy updates explicitly state the elimination of eligibility for this category of borrower. Consequently, lenders must adhere to these revised standards when assessing a borrower’s application. The focus for eligibility concerning non-citizens is now strictly placed on those with lawful permanent resident status or specific citizenship from certain compact nations, rather than those with temporary or non-permanent status.

No, United States citizenship is not a strict requirement for FHA mortgage eligibility. Borrowers with lawful permanent resident status are eligible for FHA-insured financing provided they satisfy the same terms, conditions, and requirements as U.S. citizens. The lender is required to determine the residency status of the borrower using information provided on the mortgage application and other applicable documentation. While citizenship itself is not a prerequisite, the borrower must provide evidence of their lawful permanent residence to be included in the mortgage file to demonstrate they meet the necessary legal status criteria.