Section B. Property Ownership Requirements and ...

1 HUD 4, Section B4-B-1 Section B. Property Ownership Requirements andRestrictionsOverviewIn This SectionThis Section contains the topics listed in the table NameSee Page1 General Information on Property Requirementsand Restrictions4-B-22 Eligibility Requirements for PrincipalResidences4-B-53 Eligibility Requirements for SecondaryResidences4-B-94 Investment Property Eligibility andUnderwriting Requirements4-B-11 Chapter 4, Section BHUD General Information on Property Requirements andRestrictionsIntroductionThis topic contains general information on Property Requirements andrestrictions, including occupancy restrictions description of a condominium Requirements for condominium eligibility a reference for investor Property limitations locating additional information on Property eligibility and valuation manufactured housing condominium projects (MHCP), and Requirements for site DateMarch 1, as otherwise stated in this handbook, FHA s single family programsare limited to owner-occupied principal residences.

2 For more information on what FHA will and will not insure, seeHUD of aCondominiumA condominium is a multi-unit project that has individually-owned units, which may be either attached in one or more structures, or detached from each other, and is essentially residential in use (for FHA purposes).A condominium regime is created by state or local law and is characterized byfee simple Ownership of a unit which is defined in the condominiumdocuments, together with common areas. The Property interest in these areasis both common and undivided on the part of all unit owners, each of whombelongs to the Homeowners Association (HOA) that typically maintains theproperty and collects assessments or dues from each unit : For more information on condominiums, seeHUD ,Minimum Property Standards for on next pageHUD 4, Section B4-B-31.

3 General Information on Property Requirements andRestrictions, must approve condominium projects before a mortgage on an individualcondominium unit can be : For more information on condominiums, including condominiumproject approval Requirements , see HUD ,Valuation Analysis for Single Family One- to Four-UnitDwellings, and HUD , Section 234(c), Home Mortgage Insurance for (Reference)Entities purchasing investment properties are limited to a financial interest inseven rental dwelling :For additional information on investment Property Requirements , see HUD , and the dwelling unit limitation for investors, see HUD andValuation(Reference)For more information on Property eligibility and valuation, see HUD HUD Analysis for Single Family One- to Four-UnitDwellings HUD ,Minimum Property Standards for Housing HUD ,Architectural Processing and Inspections for Home MortgageInsurance,and Section 203(b) of the National Housing Act,24 CFR on next pageChapter 4, Section BHUD General Information on Property Requirements andRestrictions, (MHCP)Individual manufactured housing units in condominium projects are eligiblefor FHA insurance, on both Home Equity Conversion Mortgages (HECM)

4 And forward mortgages. All manufactured housing condominium project(MHCP) approval requests must be processed by the Homeownership Center(HOC) having authority over the area in which the Property is : For more information on MHCP approval, seeHUD ,Valuation Analysis for Home MortgageInsurance, and site condominiums, see Condominiums are single family totally detached dwellings encumberedby a declaration of condominium covenants or condominium form ofownership. They have no shared garages or any other attached approval is not required for site condominiums unless they do notmeet this processed as Section 203(b) loans, the applicable ADP codes forsite condominiums are 731 for Adjustable Rate Mortgages (ARM) and 734for fixed rate loans.

5 Appraisal data is collected and reported on Fannie Maeform 1004, and the Condominium Rider must be included in the FHA : Manufactured housing condominium projects may not be processed assite : For more information on MHCP approval, seeHUD ,Valuation Analysis for Home MortgageInsurance, and modular homes, seeHUD , CHG-1, Appendix 4, Section B4-B-52. Eligibility Requirements for Principal ResidencesIntroductionThis topic contains information on eligibility Requirements for principalresidences, including a definition of principal residence the FHA requirement for establishing owner occupancy FHA-insured Mortgages on principal residences and investment properties,and exceptions to the FHA policy limiting the number of mortgages DateMarch 1.

6 PrincipalResidenceAprincipal residenceis a Property that will be occupied by the borrower forthe majority of the calendar EstablishingOwnerOccupancyAt least one borrower must occupy the Property and sign the securityinstrument and the mortgage note in order for the Property to be security instruments require a borrower to establish bona fide occupancyin a home as the borrower s principal residence within 60 days of signing thesecurity instrument, with continued occupancy for at least one on next pageChapter 4, Section BHUD Eligibility Requirements for Principal Residences, onPrincipalResidences andInvestmentPropertiesTo prevent circumvention of the restrictions on making FHA-insuredmortgages to investors, FHAgenerallywill not insure more than oneprincipal residence mortgage for any borrower.

7 FHA willnotinsure amortgage if it is determined that the transaction was designed to use FHAmortgage insurance as a vehicle for obtaining investment properties, even ifthe Property to be insured will be theonlyone owned using FHA person individually or jointly owning a home covered by an FHA-insured mortgage in which Ownership is maintained maynotpurchase anotherprincipal residence with FHA insurance,exceptin certain situations asdescribed in HUD : Properties previously acquired as investment properties arenotsubject to these : For more information on exceptions to the above-stated policy, see HUD investment Property Requirements , see HUD , and the dwelling unit limitation for investors, see HUD on next pageHUD 4, Section B4-B-72.

8 Eligibility Requirements for Principal Residences, tothe FHA PolicyLimiting theNumber ofMortgages PerBorrowerThe table below describes the exception situations in which FHA doesnotobject to borrowers obtaining multiple FHA-insured : To determine the eligibility of a borrower for one of the exceptions inthe table below, the underwriter must consider the length of time the previous Property was owned by the borrower, and circumstances that compel the borrower to purchase another residence withan FHA-insured : In all cases other than those listed below, the borrower isnoteligible to acquire another FHA-insured mortgage until he/she has either paid off the FHA-insured mortgage on the previous residence, or terminated Ownership of that ExceptionEligibility RequirementsRelocationA borrower may be eligible to obtain another FHA-insuredmortgage without being required to sell an existing propertycovered by an FHA-insured mortgageifthe borrower is relocating, and establishing residency in an area outside reasonable commutingdistance from his/her current principal the borrower subsequently returns to the area where he/she ownsa Property with an FHA-insured mortgage.

9 He/she isnotrequired tore-establish primary residency in that Property in order to beeligible for another FHA-insured : The relocation need not be employer-mandated to qualifyfor this on next pageChapter 4, Section BHUD Eligibility Requirements for Principal Residences, Exceptions to the FHA Policy Limiting the Number of Mortgages Per Borrower(continued)Policy ExceptionEligibility RequirementsIncrease in family sizeA borrower may be eligible for another home with an FHA-insuredmortgage if the number of his/her legal dependents increases to thepoint that the present house no longer meets the family s borrower must provide satisfactory evidence of the increase in dependents and the Property s failure to meetfamily needs, and that the Loan-To-Value (LTV)

10 Ratio equals 75% or less, based onthe outstanding mortgage balance and a current appraisal. If not,the borrower must pay the loan down to 75% LTV or : A current residential appraisalmustbe used to determineLTV compliance. Tax assessments and market analyses by realestate brokers arenotacceptable proof of LTV a jointly ownedpropertyA borrower may be eligible for another FHA-insured mortgage ifhe/she is vacating a residence that will remain occupied by : A couple is divorcing and the vacating ex-spouse willpurchase a new borrower may be qualified for an FHA-insured mortgage onhis/her own principal residence even if he/she is a non-occupyingcoborrower with a joint interest in a Property being purchased byother family members as their principal residence with an FHA-insured.