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What You Can Buy With An FHA Mortgage

What You Can Buy With An FHA Mortgage

Do you know what you can buy with an FHA mortgage? The answer may surprise you if there’s an assumption that only typical suburban houses are available for purchase with an FHA loan. Know your options long before you start the planning stages of your new loan-you will be glad you did.

What You Can Buy With An FHA Home Loan

In essence, the FHA loan program is strictly designed for home buying, for properties with as many as four living units. You cannot use an FHA loan as a personal loan, to purchase a home without (or that will not be affixed to) a permanent foundation. You can use an FHA loan to buy a home, but not a vacation home or other property that will not serve as your main address. FHA loans are generally for principal residences only. No timeshares, vacation spots, etc. FHA home loans are intended for owner/occupiers.

FHA Loans For Existing Construction Houses

FHA home loans are available for homes that have been occupied by at least one owner, classified as existing construction. That’s not the only construction type available with the FHA loan program, but it’s one of the most commonly purchased.

Existing construction properties will require an appraisal to determine the fair market value of the home. In most cases, the age of the property is not an issue except as it may relate to lead-based paint issues, historical significance or other factors. State law and lender standards may also address the age of the property, so don’t expect FHA loan rules to be the only ones at work in such transactions.

FHA Loans For New Construction Homes

FHA loans (including the FHA One-Time Close Construction Loan) are also available for new constructions. You can have a home built to suit, with no previous owner, under the FHA construction loan program. You will find some home loans will have two loan application dates and two closing dates for construction loans, but the FHA One-Time Close mortgage is different.

As the name implies, there is only one closing date and one loan application for the entire process. No waiting to see if you qualified for the second loan, no wondering if the project will finish in a timely manner or experience setbacks because of the second loan application.

One-Time Close loans are technically available for both stick-built homes and manufactured housing. You may find some lenders will not offer manufactured home loans, so be sure to check in your area to see what is possible with a One-Time Close (FHA OTC) Construction Loan.

There are also higher FICO score requirements and other factors unique to the OTC loan process. Discuss the FHA OTC with your loan officer to see what may be available for you through that financial institution.

FHA Loans For Condominium Units

FHA loans may be used to purchase qualifying condo units in condominium projects that are either on or added to the FHA approved list. You will need to work with your loan officer to determine whether a given condo project is on the list or able to be added to it.

The FHA approved list does not accept projects that requires a right of first refusal for FHA borrowers-when it comes to freely selling your new home, you cannot be restricted in any way by the Condo Owners’ Association covenants or agreements.

Condo loans are different than typical suburban home purchases because of requirements and situations like these; borrowers should know that it is NOT impossible to get an FHA condo loan, but to expect the process to take a bit longer in cases where a condo project isn’t yet on the FHA approved list.

Joe Wallace - Staff Writer

By Joe Wallace

March 15, 2018

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.

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About FHANewsBlog.com
FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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