What kind of home can you buy with an FHA mortgage? The answer isn’t what some people expect, likely due to a misunderstanding of the FHA loan program, who it is intended for, and why it exists. A good example of this? The assumption that FHA mortgages are primarily for first-time home buyers or the economically disadvantaged. Such assumptions are not true.
FHA loans are for any financially qualified applicant, which means you don’t have an income threshold to meet, there are no restrictions on those who have purchased homes before, and there is no income maximum.
What kind of home can you purchase with an FHA mortgage?
FHA loans permit the purchase of homes which are primarily residential, have no restrictions of resale, and which meet FHA minimum standards for safety and economic viability. Borrowers will find that while not all participating FHA lenders offer all FHA loan products, it is possible to find a participating lender to issue a mobile home loan, a condo loan, or a mortgage on a multi-unit property.
FHA Condo Loans
Condo loans are possible under the FHA 203(b) program, but the condo project is required to be on or added to the FHA approved list. Such a list is required because of the communal nature of condominium projects. The lender cannot issue an FHA loan for a condo project that has restrictions on the resale of the unit, such as “right of first refusal” clause found in some condo owner association agreements.
Condo projects that meet FHA standards will have no such “first refusal” clause for the borrower to agree to. Borrowers who find condo units in projects that are not currently on the FHA approved list will need to work with the lender to see whether the project may be added. Additionally, the condo unit must pass the FHA appraisal as with any other type of mortgage.
FHA Loans For Mixed-Use/Mixed Zoning Properties
FHA loans are technically available for homes that have a non-residential component or that are located in areas with mixed-use zoning. FHA loan rules have restrictions on how much non-residential use of the home is permitted (no more than 49% of the total floor space can be non-residential) and there is a requirement that the non-residential nature of the property be subordinate to the residential use of the home.
According to the FHA loan handbook, HUD 4000.1, “Any non-residential use of the Property must be subordinate to its residential use, character and appearance. Non-residential use may not impair the residential character or marketability of the Property. The non-residential use of the Property must be legally permitted and conform to current zoning requirements.”
FHA Loans: NOT For Houseboats, RVs Or Other Non-Real Estate Purchases
Any home to be purchased or refinanced with an FHA mortgage must be taxable as real estate and be classified as “real property”. Houseboats, RVs, and other types of quasi-residential vehicles do not qualify for FHA loans in this regard.
They have no permanent foundation, and cannot be taxed as real estate. In the case of mobile homes or manufactured homes, the rules in HUD 4000.1 state that the final disposition of such structures must include being affixed to a permanent foundation that meets both FHA standards and state/local requirements.