Eligibility rules for FHA loans are found in HUD 4000.1, which addresses who is permitted to apply for an FHA single-family home loans. Who can apply for an FHA loan and what do the rules say about these applicants?
The most basic eligibility rules for FHA loans include the requirement that the borrower be an owner-occupier of the property to be purchased.
FHA loan rules do not permit FHA single family home loans to be used for investment properties, so the borrower who wishes to buy a multi-unit property and rent out all of those units to other people would not be approved for the mortgage. The same is true of those who wish to purchase time shares, condo hotels, or other “transient occupancy” or short-duration occupancy properties.
That said, military members will find FHA loan rules favorable to their needs-if a military member purchases a property with an FHA mortgage but is deployed out of the local area, they are still considered owner-occupiers.
FHA loan rules don’t penalize the borrower for serving her country, but the rules do require the buyer to intend on using the home as the primary residence. Borrowers with immediate family members or co-borrowers who intend to occupy the property in the meantime should discuss those circumstances with the lender.
One thing that might surprise some potential borrowers is the section in the eligibility rules for FHA loans that addresses citizenship. According to HUD 4000.1, page 129, “U.S. citizenship is not required for Mortgage eligibility”. That’s good news for lawful permanent resident aliens and non-permanent resident aliens who want to purchase a home with an FHA mortgage.
FHA loan rules in HUD 4000.1 do require documentation and supplemental information to determine the status of an applicant who may be affected by the rules in this area; borrowers should come to the FHA loan process ready to show work authorization documents, Social Security Numbers, and indicators of residency or permanent residency where applicable.
If you aren’t sure how your military or residency status affects the processing of your FHA home loan, discuss your circumstances with a loan officer.