April 22, 2015
Many of our reader questions posted in the comments section here come from loan applicants and home buyers, sometimes even sellers, all wanting to know more about certain aspects of the FHA loan process. But one recent question comes from a lender, who asks:
“Customer had bankruptcy chapter 7- discharged 1-2012. Wants to but a home that has a convience store attached to it. Can I do the loan with 5% down and count the income from the store?”
FHA loan rules for mixed-use property appraisals address this issue. HUD 4150.2 Chapter Three states:
“A qualified property must be predominantly residential in use and appearance. Any nonresidential use of the property must be subordinate to its residential use, character and appearance. A property, any portion of which is designed or used for nonresidential purposes, is eligible only if the type or extent of the nonresidential use does not impair and/or remove the property’s residential character and appearance.”
That is a fairly general rule and open to interpretation, so it’s clear that an appraisal would be required to determine the suitability of the property for an FHA single-family home loan.
The income/business question is trickier. Is the borrower currently receiving income from the business attached to the property being considered for the FHA home loan? Is the borrower purchasing the business as well, rather than running it from a rental property with an option to purchase? A call directly to the FHA at their toll-free number may be in order (1-800 CALL FHA) to get further clarification.
If the FHA single family loan program does permit this type of purchase, the amount of the loan would extend only to the residential nature of the property–in other words, a borrower cannot purchase a business with an FHA home loan.
Do you have questions about FHA home loans? Ask us in the comments section.
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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