February 22, 2022
Is it possible to buy a home with an FHA loan to use as an Airbnb-type venture? Borrowers are eligible to apply for FHA home loans for up to four-unit residences; what do FHA loan rules say about using the home as a rental space?
FHA loan rules governing these situations are found in HUD 4000.1.
Borrowers may feel encouraged by the notion that owner-occupied properties with up to four units can by purchased with an FHA mortgage, and even more encouraged that the rules actually do address (and permit) borrowers to rent out the unused living potions.
However, renting these units out is also subject to FHA loan rules (in addition to lender requirements and state law). What does HUD 4000.1 say about using spaces in your home purchased with an FHA mortgage for Airbnb or similar purposes?
FHA Loan Rules For Renting
The first thing to know is that HUD 4000.1, the FHA loan single family handbook, does not address Airbnb by name. Nor does it mention social sharing networks, Airbnb, or any other alternatives. So FHA loan rules do not target Airbnb practices, nor does it talk specifically about space-sharing apps.
What HUD 4000.1 does say about renting out the unused units in a multi-unit property indicates that renting on a “permanent” basis, the typical tenant/landlord relationship, is permitted by FHA mortgage rules.
Those who rent in this way may or may not, depending on circumstances, be able to use projected income from such a rental to qualify. This requires the borrower to meet additional FHA and lender requirements.
What HUD 4000.1 says is NOT allowed? Use of the home to be purchased with an FHA loan for hotel/transient purposes is forbidden.
In one section of the rules, hotel/transient/intermittent occupancy uses are specifically referenced in a list of unapproved purposes for an FHA loan:
“FHA will not insure Single-Family Mortgages secured by:
- boarding houses
- hotels
- motels
- condotels
- tourist houses
- private clubs
- bed and breakfasts
- other transient housing
- vacation homes
- fraternity and sorority houses”
State Law And Lender Standards Also Have A Say In Your FHA Home Loan Transaction
Aside from this, state law and lender requirements may also apply. FHA home loan rules seem fairly clear that, without specifically mentioning Airbnb or related services by name, the concept of renting out portions of the home on an intermittent or casual basis does not seem to be in accordance to the spirit of the rules cited here.
Talk to your loan officer to see what may apply in your transaction.
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Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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