What is an FHA Principal Residence?

A property that is occupied by the borrower for most of the calendar year is considered a principal residence.

To be defined as owner-occupied, the borrower must live in the property continually for one year, and have his or her signature on the security instrument and mortgage note. After the security instrument is signed, the borrower must take up bona fide residence in the home within 60 days.

In general, the FHA insures no more than one mortgage per borrower in order to prevent any flouting of regulations for investment gains. A borrower who owns a home covered by an FHA-insured mortgage in which ownership is maintained cannot acquire a second principal residence with FHA insurance except in cases below.

Homes that were previously purchased as investment properties are not bound by these restrictions. However, if the FHA determines that the transaction was an attempt to use FHA insurance for acquiring investment properties, the mortgage will not qualify for insurance, even though it may be the only property the applicant owns.

A borrower is allowed to purchase a second home with an FHA-insured mortgage if he or she is relocating to a new area out of the bounds of reasonable commuting distance to his or her current principal residence. The relocation does not need to be as a result of employment, and the borrower does not have to sell his or her first home. Also, when returning to the area of the first FHA-insured property, the borrower is not required to re-establish primary residency there to have FHA insurance eligibility.