203(k) Loans and Owner-Occupied Properties
FHA loans are only available to borrowers who will actually be living in the home for the majority of the year. This automatically excludes second homes and vacation homes, as well as most types of investment properties (with some exceptions). The FHA requires that all properties purchased with FHA loans be owner-occupied, meaning that the home will be your primary residence.
In most states in the US, this also entitles you to claim a homestead exemption on the property. The reason for this is that the FHA’s ultimate goal is to help make it simpler for families to purchase their own home. The organization does not serve the needs of landlords or investors – it focuses on helping the average family attain the American dream of homeownership. Borrowers will also find that taking out an FHA loan prohibits them from purchasing a second primary home. Not following FHA owner-occupied requirements can result in negative consequences, including reducing a borrower’s creditworthiness.