Owner-Occupancy Requirement

Owner-occupied financing carries lower down payments and better pricing than investor loans because the lender is betting on a resident, not a business. The occupancy promise is what earns those terms. Per HUD Handbook 4000.1, an FHA borrower must occupy the property as a principal residence within 60 days of signing and intend to continue occupancy for at least one year.

The rule is what makes house hacking legitimate rather than a loophole: living in one unit of a 1-to-4-unit property satisfies it while the other units earn rent. Misrepresenting occupancy to get owner-occupied terms on a pure rental is occupancy fraud. Conventional and VA programs carry their own occupancy rules, so check the specific program rather than assuming the FHA timeline.