A reader asks, “I have a grand daughter who is looking to buy a fore close house asking only 12, 000.00.. Is there a program out there to help her. some one had started doing repairs to the house. a new bathroom, up dated kitchen tile kitchen and bathroom floors. She wants to use this property as a investment.”
The FHA single family home loan program is intended for owner-occupied residences only, so the basic answer to this question (where FHA single family home loans are concerned, which is the focus of our blog) is no–at least for new purchase home loans (see below for more information).
That’s not to say that the borrower might not be able to find some state or local program made available to investment property buyers depending on the state. But that’s outside the scope of our writing here.
What does the FHA loan rulebook say about using an FHA single-family home loan to buy an investment property? Let’s examine HUD 4155.1 Chapter Four Section B, which states:
“To prevent circumvention of the restrictions on making FHA-insured mortgages to investors, FHA generally will not insure more than one principal residence mortgage for any borrower. FHA will not insure a mortgage if it is determined that the transaction was designed to use FHA mortgage insurance as a vehicle for obtaining investment properties, even if the property to be insured will be the only one owned using FHA mortgage insurance.”
Furthermore, Chapter Four says, “Any person individually or jointly owning a home covered by an FHA-insured mortgage in which ownership is maintained may not purchase another principal residence with FHA insurance, except in certain situations as
described in HUD 4155.1 4.B.2.d.”
However, in certain cases, where the purchase of a HUD REO property is concerned (where an owner defaulted on an FHA mortgage and the home went into foreclosure) a borrower may not be required to be an owner/occupier. According to HUD 4155.1 Chapter Four Section B 4 C, in certain cases the occupancy requirement could be waived:
“For purchases of HUD REO properties, owner occupancy is not required when the jurisdictional HOC sells the property and permits the purchaser to obtain FHA-insured financing on the investment property.” Speak to a loan officer to learn more about this possibility and under what circumstances you may qualify for it.
Do you have questions about FHA home loans? Ask us in the comments section.