April 24, 2015
A reader asks, “I have rental property with a mortgage balance of $26000. The property shows a current value of $98900. I would like to refinance but seem to have a problem getting it refinanced? What would you advise me to do in order to utilize my equity to finance another investment.”
The scope of this blog is FHA single-family home loans, and we answer questions about FHA loans with that scope in mind. Non-FHA loan related questions that deal with general finance topics may or may not be outside our range of topics. The reader question above may have been submitted under a mistaken assumption that the FHA single family home loan program might include refinance loans (which it does) for investment properties or other non owner-occupied residences (which it does not).
With that in mind, let’s see what the FHA loan rules printed in HUD 4155.1 Chapter Four Section B have to say about occupancy and FHA loans:
“Except as otherwise stated in this handbook, FHAs single family programs are limited to owner-occupied principal residences only.”
That means unless you plan to live in the home being purchased or refinanced with an FHA single-family home loan, you won’t be approved for the loan. HUD 4155.2 Chapter One adds the following:
“FHA will not insure mortgages secured by
commercial enterprises
boarding houses
hotels and motels
tourist houses
private clubs
bed and breakfast establishments, or
fraternity and sorority houses”
In short, investment properties can’t be purchased or refinanced under this FHA loan program. A Google search of the phrase “FHA loans for investment property” turns up results that would, on the face of it, seem to indicate that you CAN purchase or refinance investment properties, but a closer look at these articles shows that they all come back to the FHA loan occupancy rules–“owner/occupiers only”–as the main factor in how a borrower can proceed with such a loan application.
Do you have questions about FHA home loans? Ask us in the comments section. All questions/comments are held for moderation before appearing on the site.
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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