January 12, 2024
FHA loan rules are found in HUD 4000.1, the FHA Single-Family Lender’s Handbook. Those rules include a list of property types you can and cannot buy with an FHA home loan.
We examine the types of properties you cannot purchase with an FHA mortgage below.
Knowing loan program rules is important if you’re a new house hunter. Do you need a government-backed loan like an FHA 203(b) purchase loan? Or a VA home loan?
It’s true that certain restrictions and requirements for conventional home loans are different than the ones for FHA mortgages, but the gist is that house hunters need to know the rules of the home loan they want.
For example, do you want to build a home using a One-Time Close construction loan? You may be limited by lender standards to a home with a single living unit.
A multi-unit property is technically permitted under FHA single-close construction loan rules but the fact is that many participating lenders may be unwilling to issue construction loans for those multi-unit purchases.
Ineligible Property Types For FHA Single Family Loans
What is the first thing to know about ineligible property types? It’s easy to remember. You can’t buy a house with an FHA mortgage if you don’t intend to live in the home as your primary residence.
Other ineligible property types for FHA loans? Any mobile or manufactured home older than June 15, 1976, and homes built within special flood hazard zones, coastal barrier regions, properties too close to gas pipelines, or high voltage easements.
FHA Loans Approval For Air-b-n-b?
You won’t be approved for an FHA loan to buy any property deemed a “transient occupancy” operation where tenants stay fewer than 30 days.
This includes room sharing options with terms shorter than 30 days, condo-hotels, or any hotel-like operation. Air b-n-b operations don’t qualify for FHA mortgages.
What To Know About FHA Loan Approval
Depending on circumstances, FHA loans may be approved for purchasing a mixed-use property. FHA loans are also good for mixed-zoning properties with similar caveats. Lender approval is key.
Your non-residential use of a mixed use property must be “subordinate to the residential nature” of the structure. You may also find that non-residential use may be restricted to a certain percentage of the total floor area or less, according to the FHA. That percentage is low–in the 20-25% range.
Lender standards and the laws of your state may also affect your home loan transaction.
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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