What can I buy with an FHA home loan? There are many options available including town homes, condos, mobile homes, manufactured homes, and more. But there is also a list of things you cannot use an FHA mortgage loan to purchase, and that’s good to know going into your search for the right home for you.
For example, FHA mortgages cannot be used to purchase any property you don’t intend to live in as your primary residence. FHA home loans are only for properties you will live in as your home address.
FHA home loans can be used to purchase homes with a single living unit, but can be used to buy property with as many as four living units. That means that a borrower could potentially buy a four unit property with the intent to rent out the unused living units and become a landlord.
However, the borrower is required to live in at least one of those units as a condition of FHA home loan approval.
FHA home loans can’t be used to buy things that are not classified as real estate. That means the home must have a permanent foundation-either “as-is”, or in the case of manufactured or mobile homes, the home must be permanently affixed to a foundation after being transported to the land it is to be situated upon.
The permanent foundation issue is non-negotiable and is a condition of loan approval.
FHA mortgages can be used to buy a condo, a town home, or a mixed-use property that is “primarily residential in nature” according to the FHA loan handbook. But FHA Single-Family Home Loans can’t be used to buy condohotels, time shares, vacation homes, or other properties that are not “residential” but instead classified as “transient housing”.
FHA home loans can be approved for homes that are in known flood zones or other natural disaster hazard areas, but these loans may require hazard insurance as a condition of loan approval.
In such cases, your loan officer will explain the requirements; those requirements will vary depending on the state, the financial institution, and other factors that apply in your housing market. The FHA does not have specific information for each state, housing market, etc. where hazard insurance is concerned.
FHA loans can be approved for older homes, but if there are lead paint issues or other age-related concerns, they may require attention if the FHA appraiser notes a defective condition, a hazard, etc.
Older mobile homes have certain age restrictions that don’t apply to “stick-built housing”, and there may be location-specific requirements that don’t apply in other housing markets. Ask your lender about which of these issues may or may not apply to your transaction.