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What are the FHA home loan rules for first-time home buyers? If that seems like a trick question to you, you’re on the right track. There are NO FHA home loan rules that pertain exclusively to first-time home buyers.

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FHA Home Loan Rules: First-Time Home Buyers

August 9, 2019 - What are the FHA home loan rules for first-time home buyers? If that seems like a trick question to you, you’re on the right track. There are NO FHA home loan rules that pertain exclusively to first-time home buyers.

That is because FHA mortgages are available to any qualified borrower whether or not you have owned a home before, own one now, or have borrowed money to buy a home before (alone or with someone else).

Why do people assume FHA mortgages are for first-time buyers only? Partly because they may have heard about other government-backed FHA loans that DO require you to meet certain standards including income limits, etc.

FHA mortgages may be restriction-free in this area but that does not mean there are NO requirements. One of the most important FHA loan rules involves the nature of the property you wish to purchase or have built for you using an FHA One-Time Close construction loan.

The FHA Occupancy Rule

The FHA loan rulebook, HUD 4000.1, states clearly that FHA mortgages are intended for those who wish to purchase residences. Owner/occupiers can be approved for FHA mortgages even if they plan to rent out unused living units in their home to others.

But at least one borrower must reside in the home as the primary address in order to be approved for an FHA loan or FHA construction loan. You can’t purchase an investment property using an FHA single-family mortgage.

First Time Home Buyer Advantages

As mentioned above, the FHA loan rules don’t favor first-time home buyers. But that does NOT mean that your local community or participating lender won’t have options for you if you qualify. There are incentives for first-time buyers and first-time home loan borrowers, especially at the state level (depending on the state).

You may be able to find down payment help in your local area as a first-time buyer. You could qualify for state programs that can help with down payment grants, tax incentives, or other perks to encourage home ownership.

But these programs are not administered by the FHA and you will need to search your local resources to find them. The extra work is definitely worth the effort- you will be glad you explored your options. Remember to ask your loan officer if there are known resources in your area, and a real estate agent may also be able to guide you in the right direction.

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