October 15, 2020
Who is eligible for an FHA home loan? To begin, we must point out that FHA mortgages are not need-based loans, feature no income caps, and do not require you to be a first-time home buyer to apply.
FHA mortgage eligibility rules are found in HUD 4000.1, including instructions for the lender pertaining to who is allowed to apply for an FHA single-family home loans. Who can apply for an FHA loan and what do the rules say about these applicants?
Some of the rules about being eligible for an FHA mortgage have to do with the status of the buyer–does the borrower intend to be an owner-occupier or does the borrower want to purchase property they do not intend to use as the primary residence? FHA mortgage loans to purchase a single-family home require the borrower to occupy the home.
If you get the impression that FHA loan rules do not permit FHA single family home loans to be used for investment properties, you are correct.
A borrower who wishes to buy a multi-unit property and rent out all of those units to other people would not be approved for the mortgage. The borrower who wants to occupy one of the living units as their home address would qualify for the FHA mortgage assuming they meet the financial qualifications.
Those who wish to purchase time shares, condo hotels, or other “transient occupancy” or short-duration occupancy properties cannot do so with an FHA mortgage.
However, the FHA loan options does work for those in the military. If a military member purchases a property with an FHA mortgage but is deployed out of the local area, the owner is still considered an owner-occupier in spite of being deployed.
FHA loan rules don’t penalize the borrower for serving in uniform. That said, the rules do require the buyer to intend on using the home as the primary residence–you can be absent from the home when duty calls, but if you don’t plan to live in the property as your home address when you are not serving, an FHA loan is not for you.
One thing that some potential borrowers don’t realize? There is a section in the eligibility rules for FHA loans addressing citizenship requirements for FHA mortgages.
According to HUD 4000.1, page 129, “U.S. citizenship is not required for Mortgage eligibility”. That’s good news for lawful permanent resident aliens and non-permanent resident aliens who want to purchase a home with an FHA mortgage.
FHA loan rules in HUD 4000.1 do require documentation and supplemental information to determine the status of an applicant who may be affected by the rules in this area. Expect to show any relevant work authorization documents, Social Security Numbers, and indicators of residency or permanent residency where applicable.
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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