Nationwide Mortgage Licensing System (NMLS) Practice Exam

How long does a borrower have to occupy a property purchased with an FHA loan?

1. 6 months

2. 12 months

3. 18 months

4. 24 months

The correct answer is: 12 months

The requirement for a borrower to occupy a property purchased with an FHA loan is indeed 12 months. This rule is in place to ensure that the property is used as the borrower's primary residence, which is one of the core stipulations of FHA financing. The government-backed nature of FHA loans aims to support homeownership among individuals, particularly first-time buyers, and ensure the stability of home occupancy. When a borrower utilizes an FHA loan, they must demonstrate their intent to live in the home as their primary residence for at least a year. This 12-month occupancy requirement not only reinforces the purpose of the loan program but also helps to mitigate risks associated with investment properties or non-owner-occupied homes, thus supporting the housing market and promoting more stable communities. After the 12-month period, the borrower may choose to rent out the property or sell it without penalty, but this initial requirement is crucial for maintaining the integrity of the FHA insurance program.