August 27, 2020
What kinds of homes can be purchased with an FHA mortgage loan? You can build a home from scratch using an FHA Construction mortgage, but may people want to buy existing property and what kinds.
Eligible Property Types For FHA Mortgages
FHA loan rules in HUD 4000.1 state clearly that certain kinds of property are permitted and certain kinds are not.
These rules on eligible property types that can be purchased with an FHA mortgage loan are found in HUD 4000.1, and include the following guidance you should know:
“FHAs programs differ from one another primarily in terms of what types of Properties and financing are eligible. Except as otherwise stated in this SF Handbook, FHAs Single Family programs are limited to one- to four-family Properties that are owner-occupied Principal Residences.”
Yes you can buy a home with as many as four individual living units, and it’s possible to buy a house you plan to live in AND rent out the unused units. You can be a landlord with an FHA mortgage, you just can’t be a landlord that doesn’t live on the property.
The phrase, “owner-occupied principal residences” is an important one-FHA mortgage loan rules include an occupancy requirement which states the borrower must intend to occupy the home as the primary residence. This normally must happen within 60 days (two months) of the closing date.
HUD 4000.1 also has guidelines on specific property types that can be purchased. “FHA insures Mortgages on Real Property secured by:
–Detached or semi-detached dwellings
–Manufactured Housing
–Townhouses or row houses
–Individual units within FHA-approved Condominium Projects”
Manufactured homes may include mobile homes with a permanent foundation, modular housing, etc.
Homes That Are Not Eligible For FHA Mortgages
Any property to be purchased with an FHA mortgage loan must be classifiable as real property / real estate for tax purposes. FHA loans don’t get approved for property that will not be permanently fixed to an approved foundation. That means recreational vehicles (RVs) and houseboats don’t qualify.
FHA single-family home loans are not possible for the following ineligible property types:
Hotels/Motels
- Hotels/Motels
- Condotels
- Bed and breakfasts
- Commercial enterprises
- Boarding houses
- Tourist houses
- Private clubs
- Transient housing
- Vacation Homes
- Fraternity and sorority houses
The residential nature of the property is very important. Borrowers are permitted to purchase a mixed-use property as long as the residential nature of the building overall is not compromised and the non-residential use is subordinate to the residential nature of the property.
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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