The Federal Housing Administration helps borrowers with low incomes or minimal down payment funds buy and refinance homes. FHA-insured home loans made by approved lenders require only 3.5 percent down and have flexible qualifying guidelines. In exchange for a more accessible loan, the FHA requires that you use the property as your principal residence. This owner-occupancy requirement has some exceptions that allow a borrower to have an FHA loan on a second property.
You establish owner occupancy by living in the home for a majority of the year and moving in within 60 days of getting the loan. FHA prohibits investors from using its programs to build a portfolio of investment properties, generally insuring only one loan at a time for the same borrower. You can get another FHA loan for a home that you will occupy as a primary residence without having to sell or refinance the previous property, however -- as long as you don't intend to use the new home as a vacation or rental property.
You can get another FHA loan for a home that is located "in an area outside reasonable commuting distance" from your previous principal residence. Generally, the new home must be located at least 50 miles away from where you lived before. The relocation exception applies to borrowers regardless of whether the move is employer-mandated. You can maintain FHA loans on both homes, even if you move back to the area in which your previous home is located.
You can get an FHA loan on another residence if your family size increases and outgrows the previous property. You must prove that the family increase involves legal dependents, and that your previous home no longer meets the household's needs. The loan amount on the previous property must not exceed 75 percent of the home's new appraised value. You have to provide the lender with an appraisal report that compares your home to surrounding properties that have recently sold. If your home hasn't increased in value enough to meet this requirement, you can also pay the loan balance down to 75 percent.
If your divorce decree states that your ex-spouse keeps the house as part of the settlement, you can buy another home to live in using an FHA loan. You don't need to refinance out of the previous FHA loan.
You can also have two FHA loans if you previously helped a family member get a loan as her non-occupying co-borrower. The new home you purchase with the FHA loan must be used as your primary residence.
Karina C. Hernandez is a real estate agent in San Diego. She has covered housing and personal finance topics for multiple internet channels over the past 10 years. Karina has a B.A. in English from UCLA and has written for eHow, sfGate, the nest, Quicken, TurboTax, RE/Max, Zacks and Opposing Views.