July 29, 2022
If you are buying an existing construction home with an FHA mortgage, or having one built for you using an FHA One-Time Close construction loan, you will notice some common requirements for these mortgages; one such requirement involves the borrower’s use of the property once the loan has closed.
FHA new purchase mortgages, also known as forward mortgages, are intended for those who wish to occupy the home as their main address, or “primary residence”.
Some borrowers may be confused by this requirement because they assume you can buy and rent out a home using an FHA mortgage without intending to occupy it.
But the reality is that FHA mortgages actually require occupancy by at least one person obligated on the home loan, so how is it possible to purchase and rent property using an FHA mortgage?
FHA Home Loans Permit The Purchase Of Multi-Unit Properties
If you have heard stories of people buying and then renting out a home using an FHA mortgage, chances are good that those buyers have purchased a multi-unit home and are renting out the unused living spaces there.
Borrowers would technically be free to vacate the property they bought with an FHA mortgage and rent out the home if they have had the loan refinanced into a non-FHA mortgage.
But in general, the way you can become a landlord while still meeting the occupancy requirements of an FHA mortgage? Buy a multi-unit property and rent out the other living units you won’t be using.
FHA home loans don’t allow the purchase of some properties even if you do intend to be an owner/occupier. This is true for bed-and-breakfast enterprises, condohotels, or other types of property the FHA deems as being “intermittent occupancy”.
Basically, if the occupants are not staying for 30 days or more, the occupancy is considered transient or intermittent and FHA loans are not permitted for such purposes.
FHA Home Loans Are For Year-Round Residences
FHA loan rules do not allow borrowers to buy vacation homes, purchase timeshare options, or any kind of mobile home not intended to be placed on a permanent foundation.
You cannot buy a houseboat or recreational vehicle with an FHA mortgage for this reason. These kinds of purchases cannot be legally classified as “real property” or taxed as real estate, so they are not eligible for an FHA mortgage.
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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