November 21, 2017
What kinds of property can I buy or refinance with an FHA loan? This is a question we’ve been examining lately, starting with the FHA requirement for homes to be used as the primary residence for at least one person obligated on the mortgage note. But there are other requirements borrowers need to know when looking for a home to buy with an FHA mortgage.
Eligible Property Types For FHA Single-Family Loans
HUD 4000.1 explains, “FHA’s Single Family programs are limited to one-to four-family Properties that are owner-occupied Principal Residences. FHA insures Mortgages on Real Property secured by:
-detached or semi-detached dwellings
-Manufactured Housing
-townhouses or row houses
-individual units within FHA-approved Condominium Projects”
The occupancy requirements are identical for all property types. The actual date of occupancy may vary depending on the type of home loan you apply for. An FHA One-Time Close construction loan would, for example, require the borrower to take occupancy once the construction and inspections are completed, rather than the standard 60 days after loan closing for existing construction loans.
Types Of Property Not Eligible For FHA Single Family Home Loans Or Refinance Loans
HUD 4000.1 has a list of properties that are not allowed to be purchased or refinancing using an FHA single family mortgage loan. They include but may not be limited to the following:
-commercial enterprises
-boarding houses
-hotels
-motels
-condotels
-tourist houses
-private clubs
-bed and breakfast establishments
-other transient housing
-vacation Homes
-fraternity and sorority houses
Can I Use The Home I Purchased With AN FHA Mortgage As An Air B-n-B?
FHA loan rules in HUD 4000.1 do not specifically reference “Air B-n-B” or other operations by name, but there is a specific prohibition against using the property you buy with an FHA mortgage as “transient housing”. From HUD 4000.1:
“The Mortgagee must obtain the Borrower’s agreement that Investment Properties using FHA-insured financing will not be used for hotel or transient purposes, or otherwise rented for periods of less than 30 Days.”
The key phrase in the quote above is “or otherwise rented for periods of less than 30 days”. Discuss this issue with your loan officer if you are unsure how this rule applies to your transaction.
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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