If you’re looking for an FHA guaranteed home loan, it can be a very big help to know in advance what kinds of properties the FHA will and won’t approve loans for in its single-family home loan program.
There are sometimes misconceptions about the FHA single-family home loan program; some borrowers are interested in loans for commercial buildings or properties, but single-family home loans are intended for purchasing a dwelling for the borrower’s personal use.
The FHA’s list of approved and unapproved uses for an FHA mortgage make it fairly obvious how these loans can be used, but if you’re new to the program those details aren’t always as clear. You can save a lot of time knowing up front what’s allowed under the FHA mortgage program.
The rules for approved uses are found in a rulebook called HUD 4155.2, Lender’s Guide To The Single Family Mortgage Loan Process. A great deal of the time we quote here from HUD 4155.1, Mortgage Credit Analysis For Mortgage Insurance, but the instructions in 4155.2 add more perspective to this part of the FHA loan process. According to the Lender’s Guide:
“FHA’s single family programs are limited to one- to four-family properties that are owner-occupied principal residences. FHA insures mortgages secured by
• detached or semi-detached dwellings
• manufactured housing
• townhouses or row houses, or
• individual units within FHA-approved condominium projects.
FHA will not insure mortgages secured by
• commercial enterprises
• boarding houses
• hotels and motels
• tourist houses
• private clubs
• bed and breakfast establishments, or
• fraternity and sorority houses”
As you can see, it’s the residential nature of a property for an individual borrower (and family, where applicable) that makes the difference in whether an FHA single-family home loan is approved or disapproved where the basic purpose of the loan is concerned. Not all the properties listed in the “approved” column may be available for purchase with an FHA loan–for example, many lenders at the time of this writing are not offering FHA loans for manufactured housing. Your experience may vary depending on the housing market.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.