December 19, 2019
What is a buy-to-let mortgage? These loans, popular in Britain and elsewhere, are basically designed for investment property buyers.
They are similar in purpose (not in terms or conditions) to bank statement loans in that both are intended to help investors and small business people.
FHA home loans do not include a buy-to-let loan, but those who want to be owner/occupiers can purchase a property with as many as four living units with an FHA mortgage.
You can buy a multi-unit home with an FHA mortgage, live in one or more of the units, and rent out the unused units to other tenants. This is completely acceptable under the terms of the FHA Single-Family home loan program. The requirement is that you live in the property yourself.
Buy-to-let loans that are intended strictly as investment properties are available from conventional lenders, but not as an FHA home loan.
FHA mortgages have restrictions on how they may be used even if the owner occupies the property. For example, you cannot buy a bed-and-breakfast with an FHA mortgage, and you cannot operate an AirBnB out of a home purchased with an FHA mortgage.
You are permitted to rent out unused units in your home purchased or refinanced with an FHA loan if those rentals are 30 days or longer. No hotel-style occupancy is permitted.
FHA loans are available for condo units, mobile homes, multi-unit properties like townhomes or other structures, and even mixed-use and mixed-zoning property.
No matter what or where you buy, the rule is that the property must be primarily residential.
Do you need a buy-to-let loan? Chances are good that if you want to be an owner-occupier and get some experience as a landlord, you can make an FHA mortgage work for you instead of a mortgage aimed at investors instead.
The interest rates and terms offered to businesses may be higher than those offered to residential customers, and that’s another important factor to remember when deciding whether the FHA loan with it’s low down payment requirements is right for you.
Remember, you can apply for an FHA mortgage to have a property built from the ground up for you using an FHA Construction loan, and that’s another option to consider when contemplating your options.
Construction loans aren’t right for all buyers–the size of the home and how quickly you can move in are deciding factors for some applicants.
Any non-residential use of the home, built or bought, must not interfere with using the property AS a home. Ask your loan officer if you are not sure how these rules apply to your transaction or how they may affect the kind of purchase you want to make.
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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