You have gotten approved for your loan, the closing process is about to be closed, and it will soon be time to move in. Sometimes, you can’t enjoy your new home right away. There could be a family illness, finishing up a job in your previous home town, or you could be a veteran getting deployed. What are your rules of occupancy with federal home loans?
WHO CANNOT OCCUPY
Let’s start with the big basics on federal home loans and occupancy. With all federal home loans, the borrower will sign an intention to occupy form which will state they will move into the home within a certain time period and live in that property for an extended period of time. There are rules to consider here.
First, you cannot primarily get a property through a federal home loan with the intent to rent out to others as an investment property or to make income off of it (unless you also live on the property). Second, you cannot get a federal home loan for a property used as a vacation home or as a time share. Finally, you may not take out a loan on a property and then have only indirect family members living in the primary residence who are not considered your spouse, your underage children, or their direct guardian.
Even if you are paying the mortgage, or would be splitting the mortgage payment with them, you would need to be the primary, full time dweller. Also, the exceptions to the “no renting” rule are if you obtain a multi-family property with the VA or FHA home loan, occupy one of the units full time, and rent out the other properties purely to pay off the mortgage and build equity, but this will be further discussed.
FHA HOME LOAN OCCUPANCY
You must be in the home within 60 days and live in that property for a minimum of one year, full time. The co-borrower can live in the residence if the primary borrower cannot be in the home within that 60 day period due to proven extenuating circumstances.
As stated previously, you can rent out part of your FHA funded property if the property is a multi-family unit and the unit you rent is not the one you are living in. You can also rent out your single-family property if you are obtaining a second property for work relocation related purposes or if your family is biologically expanding in such a way that makes your current home insufficient. Renting out that first, single-family home you had funded from the FHA can only occur after that year of living there full time has passed.
USDA HOME LOAN OCCUPANCY
The USDA home loan has a bit of a stringent occupancy policy. This loan is intended to build rural communities and give people the privilege of homeownership who otherwise would not qualify. You will have a 60 day timeline to move in and live in that property throughout the term of the loan.
Only the borrower and their immediate family may live in the residence. If there is a family member who requires constant care, such as a disabled adult or a child with special needs, the caretaker may not live in the residence. An exchange student or adopted child may live in the home, but the adults cannot claim income off of the child, they may not be receiving any compensation for hosting the student, nor may the non-biological children add to an overcrowding situation in the home.
If the loan can be paid off early, for which there is no penalty, you can move out of the property or rent it out to others once the loan is paid off. You can rent out rooms in your property under certain circumstances. These circumstances include being incapacitated and off of work, so the rented room compensates for lost wages, or if you are away for an emergency, will be out of work, and can rent out your living space only for that specified time in order to pay the mortgage.
VA HOME LOAN OCCUPANCY
Things change for veterans consistently. Let’s say there is a Permanent Change of Station (PCS), or a veteran is deployed right before or during the process of obtaining a home with the VA loan benefit, or a veteran has a job in their previous state to finish up that is considered long distance from their new home. Fortunately, though the veteran debtor will have to sign intent to occupy the home even if they know they can’t move in right away, military families and borrowers have options.
As long as the veteran’s dependent child or children will occupy the home along with the legal guardian partaking in an occupancy certification, they may stay in the home in the veteran’s place while they are deployed. Also, spouse certification of intention to inhabit the home will work if there are no child dependents. An adult child cannot occupy for the veteran, nor can the property be rented out.
Within 60 days is the period of time considered reasonable from the VA. When you know you are retiring within a year period of time and have an exact date, you will also qualify for future occupancy. Also, if the property is undergoing repairs and can’t be moved into yet, this will also be suitable.
You may only rent out a VA-funded property if it is a multi-family home and you are occupying one of the units. You cannot rent out your single-family home while it is funded by the VA home loan benefit.
Federal Home Loan Centers is here to answer your questions on home loan benefit programs from the government. Contact us for more details by calling 877-432-5626(LOAN), chat with a rep on this site, or tweet us at @fedhomeloan.