FHA loans are designed to make homeownership more attainable for low- and moderate-income earners. Because of this, it is typically not for use on investment properties, vacation homes or second home purchases. In most cases, the FHA requires borrowers use the property they’re purchasing as their primary residence.
The FHA typically requires borrowers to occupy the property they’re buying and use it for their primary residence for at least one year. By FHA standards, a primary residence is one in which the owner occupies the property for the “majority” of the year. The FHA also requires that the buyer moves into the property within 60 days of closing on their home.
These requirements are intended to prevent investors from profiting off the government loan program’s affordable rates and less stringent lending guidelines. In order to prove their intent to live on the property (and not use it as a second home or investment), buyers will need to check the “Primary Residence” box in the Uniform Residential Loan Application they file with their chosen mortgage lender.
Violating the FHA’s occupancy requirements could qualify as fraud and lead to a civil or criminal lawsuit against the borrower. Typically, borrowers are also not allowed to have more than one FHA loan at once. If your plan is to move out early and purchase another home with an FHA mortgage, talk to a lender about your options.
Getting an FHA loan to purchase a home in another state is possible, but does require some extra steps compared to buying in your home state. The FHA has specific guidelines on out-of-state purchases that you’ll need to follow With the right preparation and paperwork, you can use an FHA loan to buy a home anywhere in the US.
FHA Loan Basics
First, let’s review some basics on FHA loans. FHA loans are government-backed mortgages insured by the Federal Housing Administration. They offer low down payments, starting at just 3.5%, and lenient credit requirements. This makes them popular with first-time homebuyers.
Key features of FHA loans:
- Down payments as low as 3.5%
- Credit scores as low as 580
- Low mortgage insurance rates
- Can be used to purchase or refinance
FHA loans can be obtained from any lender that offers FHA mortgages. You apply similarly to any other mortgage, by submitting an application with income and asset documentation.
Using an FHA Loan Out-of-State
The FHA allows borrowers to purchase a home in any U.S. state or territory with an FHA loan. So if you find a home you want to buy in another state, you can get FHA financing for it.
There are a few extra requirements to meet when using an FHA loan out-of-state:
Occupancy Requirements
To qualify for an FHA loan, you must plan to move into the home as your primary residence within 60 days of closing. If you are financing a home in another state, you’ll need to provide documentation that you intend to relocate there.
This could include:
- A new job offer letter requiring relocation
- Proof you are transferring schools or colleges
- Documentation of family or relatives in the area
- Other evidence you plan to occupy the home
Appraisal
The property will need to be appraised by a certified FHA appraiser local to the area. Out-of-state lenders usually work with appraisers in the region where the home is located to conduct the appraisal.
Inspections
All FHA loans require a home inspection by a qualified professional. Your lender can help arrange an inspector local to the home’s area.
Closing
You’ll likely need to travel to the home’s location for the closing, unless you arrange for a remote online closing. Your lender can help coordinate the closing and provide options.
Working with an Out-of-State Lender
You can choose to work with either an in-state lender or a lender local to the area you are buying in. There are pros and cons to each:
- In-state lender – More familiar with local laws, may be easier to meet in person, but less knowledge of out-of-state area
- Out-of-state lender – More familiar with home’s location, easier to arrange appraisal/inspection, but less familiar with your local laws
Shop around and choose the lender that best fits your needs and offers the lowest rates/fees.
Out-of-State FHA Purchase Guidelines
Beyond the standard FHA loan requirements, there are a few specific guidelines for financing a home in another state:
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You can only have one primary residence loan at a time. If you still own a home in your current state, it must be sold or converted to a rental property before closing.
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FHA requires you to live in the new home as your primary residence within 60 days of closing.
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You can keep an existing FHA-financed home and purchase another out-of-state if:
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The new home is 100+ miles from your current one
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You are relocating for a new job
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Investment properties and second homes are not eligible for FHA financing. The out-of-state home must be owner-occupied.
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All other standard FHA guidelines apply, like loan limits, credit requirements, debt-to-income ratios, etc.
As long as you meet these parameters, you can purchase a home anywhere in the U.S. with an FHA loan.
Tips for Buying Out-of-State
If you aren’t familiar with the area you want to move to, here are some tips for house hunting remotely:
Research the Area
Spend time online researching the neighborhoods, school districts, amenities, local laws, costs of living, etc for the region you want to move to. Get to know the lay of the land before viewing homes.
Work with a Local Agent
Connecting with a trusted real estate agent who knows the area well can help immensely when looking for a home remotely. Lean on their expertise about neighborhoods and home values.
Take a House-Hunting Trip
If possible, spend some time in the area viewing homes and neighborhoods in person. Narrow your search down using online listings first, then visit and tour your top choices.
Scrutinize Listings
Look at listings closely online, researching everything about the home and neighborhood. Google street views, maps, schools, parks, etc. to get a good feel for the property and location.
Ask for 3D Tours
Many real estate agents now offer 3D video tours of listings. These virtual walkthroughs can help you get a better feel for each home.
Consider Flying for Closing
While remote closings are an option, you may want to fly out a few days before closing to do a final walkthrough. This lets you take one last look and check for any changes since inspections.
With the right prep work and research, buying an out-of-state home with an FHA loan is achievable. Just be thorough in your planning and work closely with your lender and real estate agent. Happy house hunting!
Exceptions to Occupancy Requirements
There are a few exceptions to the FHA’s occupancy rules. Military deployment or a job relocation that puts the owner outside a 50-mile radius of the home are two of the most common. Divorce or an increase in family size (which may require a larger property) could also qualify as exceptions.
Co-borrowers can also serve as exceptions. As long as at least one borrower lives in the home, all co-borrowers do not have to occupy the property within 60 days or for the majority of the year.
In some cases, an FHA loan can be used on a secondary residence — a property the borrower occupies in addition to their primary one. FHA mortgages on secondary homes are only permitted when affordable rental housing is not available in the area (or within reasonable commuting distance of the borrower’s work). The maximum loan amount is 85% of the lesser of the appraised value or sales price.
In order to use an FHA loan on a secondary residence, borrowers will need to request a hardship exception from the local Housing Opportunities Commission through their lender. The secondary home cannot be a property intended for vacation or recreational purposes.
Renting an FHA-backed Home
After occupying an FHA-backed property for at least the first year, owners are free to use the property as they wish. This can include renting the property out or using it as a secondary or vacation home. Generally, the owners will still be limited to one FHA mortgage at a time, even after the one year occupancy requirement has been met.
To better understand the FHA’s owner-occupancy standards, here are a few common scenarios to consider:
- Standard occupancy – The borrower buys the home, moves onto the property within 60 days and stays there for the majority of the calendar year (minus a few vacations).
- Job relocation – The owner moves into the property within 60 days. A job relocation puts them out of state 6 months later, well before the one-year occupancy requirement is up. Because this qualifies as an exception, he could be eligible to use an FHA loan to buy another home in his new location.
- Family expansion – Co-borrowers purchase a two-bedroom home. One month later, they find out they’re having twins. Because of the change in family size, they may be eligible to waive the one-year occupancy requirement and use an FHA loan to pay for a larger property.
- Renting out the home – The buyer purchases the home with the intent to rent it out later on. He moves into the property within 60 days and lives there for the majority of the year. After one year has passed, he moves out of the property and rents the home out for added monthly income.
- Divorce – Co-borrowers divorce 3 months after closing on an FHA-backed home. One borrower remains behind, fulfilling the one-year occupancy standard. The other borrower may be free to purchase another home using an FHA loan in their desired location.
FHA borrowers who will be unable to fulfill their occupancy requirements should talk to their lender about their options. Failing to meet these standards could have legal and financial repercussions if the proper steps are not taken.
Secrets to Getting an FHA Loan While Relocating
FAQ
Can you use a FHA loan and not live in it?
Are FHA loans the same in all states?
Can I buy a second home with an FHA loan?
Can I get a loan in California to buy a house in another state?
Can you get a mortgage in one state?
Good news. Yes, you can get a mortgage in one state to buy a property in another state. With work-from-home booming, there are some fantastic demographic shifts happening across America. Many people are now considering moving to a lower cost state due to the acceptance of working from home.
Can I get a home loan if I’m Out of State?
Yes, you can qualify for a home loan or HELOC while you are out of state. Much like getting a mortgage, you need to work with a regional or national mortgage company for the financing, if you’re long distance. Josephine Nesbit is a former contributor to Bankrate.
How many states can you get an FHA loan in?
To be considered for our “best overall” pick, lenders had to be able to issue mortgages in at least 35 states. An FHA loan is a mortgage insured by the Federal Housing Administration. Learn more about FHA loan requirements and compare offers.
Can you buy a home with an FHA loan?
First-time and repeat home buyers alike can use the FHA loan program to buy or refinance a home affordably. The FHA program backs mortgages for single-family homes being used as a primary residence. But you could buy a multi-unit property, like a duplex or triplex, as long as you live in one of the units. Verify your FHA loan eligibility.