• FHA loans are for owner-occupied properties.home sweet home image by David Dorner from Fotolia.com
  
  The Federal Housing Administration (FHA) guarantees mortgages for low-income buyers. FHA is geared toward homeowners who will occupy the property, rather than investors because the agency must pay the lender if an FHA borrower defaults on his loan. Borrowers are more likely to default on non-owner-occupied investment properties, according to MSN Money, so FHA manages its risk by limiting programs to owner-occupants.
  
  

Principal Residences

• An owner-occupied property is a principal residence. Only borrowers who plan to live in the property for the majority of the calendar year may obtain an FHA loan, according to the FHA Handbook. At least one borrower signing for the loan must occupy the property for it to be considered owner-occupied. They must move in within 60 days of signing for the mortgage and continue living there for at least one year. Generally, FHA will not allow a borrower to own two principal residences, according to the FHA Handbook, even if only one of the properties is FHA-insured. This helps to prevent investors from benefiting from FHA's programs. In the case of multi-unit dwellings, the owner must occupy one of the units for it to be considered owner-occupied, according to Realtor.com.
  
  

Condominiums

• Condominium projects must obtain approval from FHA in order for its units to qualify for the insurance. The condo project must have a certain number of owner-occupied units to gain FHA approval. Prior to 2009, FHA rules required at least 51 percent of the owners in the building live in the residence, therefore, there could be no more than 49 percent investment properties in the building. In an effort to improve buyers access to FHA loans, the agency lowered the requirement to 50 percent. The owner-occupancy rule for condominiums helps FHA manage the increased risk investment properties pose.
  
  

Owner-Occupancy Exceptions

• Special circumstances may allow a borrower to own two FHA-insured properties, despite the owner-occupancy rule for principal residences. A relocation to a home not within reasonable commuting distance from the borrower's principal residence may qualify for FHA. The owner does not have to sell or refinance out of the existing FHA-insured home or re-establish owner-occupancy in that home if he moves back into the area, according to the Department of Housing and Urban Development. Also, if a borrower's family increases in size, the borrower may obtain another home with an FHA loan that better meets his needs, without getting rid of the existing property. The homeowner must prove his need for a bigger house and give a 25 percent down payment on the new home, despite FHA's 3.5 percent down payment requirement. FHA borrowers who once occupied the home but who vacate the home due to divorce or other circumstances can also obtain another FHA loan.