January 2, 2018
Do townhomes qualify for FHA home loans? It’s a variation of the question on the minds of those looking for several different types of properties to consider buying with an FHA mortgage. What do the FHA home loan rules say about purchasing town homes with an FHA mortgage?
FHA Loan Rules For Property Eligibility
Page 149 of the FHA Single Family Home Loan rule book, HUD 4000.1, states that the following property types may be purchased with an FHA mortgage:
-detached or semi-detached dwellings
-Manufactured Housing
-townhouses or row houses
-individual units within FHA-approved Condominium Projects
As you can see from the above, FHA loans are possible for town homes. In some cases, special rules are in place regarding town homes. For example, FHA 203(k) rehab loans have specific requirements for approved improvements on the property where town homes and town home-style condo units are concerned:
“…after rehabilitation is complete, the unit is located in a Structure containing no more than four units. For townhouse style condominiums, each townhouse is considered as one Structure, provided each unit is separated by a one and one- half hour firewall from foundation to roof”.
FHA home loans permit the purchase of properties with as many as four units. For new purchase, rehab loans, and refinance loans it will be important to establish the nature of the property (condo, town house, etc. but regardless of the property type, an FHA loan cannot be used for certain properties even if they are in structures that are technically FHA-approved.
FHA Loans Are Not Approved For All Property Types
Even if the home you wish to buy meets the FHA requirements for a condo, townhome, row house, etc. there are certain properties which can never be purchased with an FHA mortgage. They include (but may not be limited to) the following:
-commercial enterprises
-boarding houses
-hotels, motels and condotels
-tourist houses
-private clubs
-bed and breakfasts
-“transient housing”
-vacation Homes
-fraternity / sorority houses
Condos, town homes, and other properties that are purchased with an FHA mortgage must be the owner’s primary residence within 60 days of closing time, and occupancy is a condition of loan approval.
At least one person obligated on the mortgage loan must occupy the home as their primary residence as a condition of loan approval. Talk to your lender if you aren’t sure how FHA loan occupancy rules may affect your transaction.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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