April 29, 2019
Some FHA borrowers want to purchase a first home, while others are looking for real estate they can purchase in addition to an existing property.
But still others are wondering if they can use an FHA mortgage loan to become a landlord by purchasing real estate they intend to rent out to others.
Does the FHA home loan program allow a borrower to apply for a mortgage loan to buy a home intended as a rental?
The short answer is that it depends greatly on two factors-the size of the home and whether the borrower intends to live in that property full-time.
Borrowers applying for FHA mortgages are allowed to purchase real estate with one to four units. The borrower is free to rent out the unused units in the home secured with an FHA mortgage and under the right circumstances may even be allowed to project rental income as part of the applicant’s verifiable income for loan approval.
The FHA loan rules for counting projected rental income require the borrower to submit supporting documentation outlining any prior experience as a landlord, among other things. Be prepared to spend some extra time completing such documentation for your loan officer if this is the route to home ownership you choose.
But what a borrower CANNOT do with an FHA loan is to purchase property she does not intend to live in full-time after the loan closes. In other words, you can be a landlord with an FHA mortgage, but you are required to live on-site in the property, which is why it’s best to consider buying a multi-unit property in such cases.
In short, occupancy is a requirement of FHA home loans and no FHA mortgage will be approved without the borrower certifying she or he will live in that home as their primary residence.
FHA loan rules will not be the only ones at work in such transactions; you will be required to meet any state laws, local ordinances, and measure up to lender standards for such loans including any additional occupancy or zoning laws.
Ask a participating lender about FHA loan rules in this area and how the financial institution of your choice may choose to proceed with such transactions above and beyond FHA loan minimum requirements.
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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