FHA Loan Basics: Acceptable Property Types
December 11, 2024
Eligible Homes
FHA loans are primarily intended for primary residences—homes that borrowers will occupy as their main dwelling. This includes single-family homes, townhouses, and even multi-unit properties like duplexes or triplexes, provided the borrower lives in one of the units.
Condominiums can also be eligible, but the project must be FHA-approved or added to the approved list. It must also meet specific owner-occupancy rates, financial reserves, and insurance coverage standards.
In some cases, a condo unit may be approved for an FHA loan even without being on that list. Ask your lender about this option.
Manufactured homes can also qualify but must adhere to HUD Code manufacturing standards and be permanently attached to a foundation.
However, certain property types are not eligible for FHA financing.
No Investment Properties
Investment properties purchased solely for rental income, vacation homes, and commercial properties are not eligible for FHA financing.
Additionally, properties in disrepair may not qualify for an FHA purchase loan unless the necessary repairs are completed before closing. Such properties may qualify for an FHA rehabilitation mortgage, and this is an option worth considering.
Standard FHA loans are not designed for extensive renovations. The FHA 203(k) loan offers a solution for purchasing and rehabilitating a fixer-upper. This program has specific guidelines regarding eligible repairs and cost limitations.
There’s No One-Size-Fits-All FHA Mortgage
It's important to recognize that FHA loans for different property types have unique requirements. For example, condominium projects undergo a more rigorous approval process, including a review of the project's financial documents and governing rules.
Manufactured homes must meet specific construction and safety standards, and depending on the circumstances, there may be restrictions on financing homes located on leased land.
Understanding the nuances of FHA loans and eligible property types is crucial for prospective homebuyers.
It is always recommended that you consult with an FHA-approved lender to discuss your individual circumstances and find the most suitable loan program for your needs.
FHA Loan Articles
October 30, 2024Just because an FHA loan is designed to be more lenient with FICO scores and require a lower down payment doesn’t mean the house you buy with that loan is less than ideal. Did you know that FHA loans have minimum property standards to ensure the home is safe and livable? Those standards require the home to have an “economic life” for the entire term of the loan so you can freely sell the property later on if you choose to do so.
October 29, 2024Buying a home with an FHA mortgage is a major life decision, and preparation is essential before you start house hunting or consider making an offer on a property.
How to get started? In the early stages, establishing your budget and how much work you need to do on your credit is key. But once you have gotten past the initial phase of that planning you’ll want to consider the house itself and what you want from it.
October 25, 2024Mixed-use properties combine residential and commercial spaces. Some borrowers applying for FHA home loans want to know if purchasing such a property using an FHA single-family home loan is possible. The FHA does allow the use of its loans for mixed-use properties, but certain conditions must be met.
October 24, 2024Buying your first home is a major milestone. If you use an FHA mortgage to buy your home, you’ll have two types of insurance to consider. One type is the FHA-required mortgage insurance premium, which is paid for 11 years or the loan's lifetime, depending on your down payment, loan term, and other variables.
October 22, 2024While the Federal Housing Administration sets rules for FHA loans, lenders retain some flexibility in determining interest rates, fees, and specific loan terms. Depending on circumstances, the FHA loan offered by your local bank might not be as competitive as one offered by a credit union or an online lender specializing in FHA products, or vice versa.
