FHA Eligible Properties
The Federal Housing Administration (FHA) is a federal loan program that enables homebuyers to purchase homes by insuring approval of mortgages by FHA approved lenders or financial institutions. As they are ultimately “backed” or insured by the federal government, there are restrictions in place, not all purchases are eligible. Unless applying for a specific FHA rehab loan, the residence must be free of safety issues, and be functional. A functioning kitchen, safe staircases, no broken windows or loose wiring can most times pass an FHA appraisal / inspection.
Long deemed the “bad credit home loan”, the FHA will back loans secured by several different types of residences. Primary residences (ones you intend to live in as your first home) that have one to four units, condominiums, manufactured homes, modular homes, rural properties , and planned urban developments. All of these options have their own specifications however.
Condos are very popular today, therefore we have created another page just for these homes and FHA condo eligibility.
Here is a quick overview however.
Minimum number of units in the condo development is two. Maximum amount of commercial space (stores, restaurants, etc ..) is 25%. No one person can own more than 10% of the units. No more than 15% of the units can be currently behind on their home ownership (HOA) dues. At least 50% of the units must be sold or occupied at purchase. At least 50% of the units must be occupied by the owner of the unit. Many FHA approved developments are advertised as such, making it easier to identify and attain financing for these properties.
Multi family or 3-4 unit residences
FHA is able to back lenders who want to lend money to those seeking these investments, but the property must be self-sustaining at purchase. The rents must be able to provide for the entirety of the mortgage payment, covering all expenses. Current rents as well as market rents (determined by an appraiser) will be needed to ensure the property is “paying for itself”. The borrower must qualify with their own income, credit scores, down payment requirements, and many times will need three months of mortgage payments (called reserves). This is in addition to the property requirements. With FHA, the person as well as the property must be approved
A manufactured home must meet the Model Manufactured Home Installation Standards, and a new home must have a one year warranty to meet FHA approval. In addition, the site itself where the home is to be placed must be deemed as suitable, and water and sewer has to already be in place. The borrower must occupy the residence as their first residence. There are restrictions on the amounts that may be borrowed and generally the length of the loan is no more than 25 years. Check with one of our specialists on the details.
For the sake of valuing a rural property for the appraisal, only 10 acres may be counted. Anything over ten acres is great to have but cannot be considered in the loan.