FHA Loan Rules for Rentals
Basically, if you buy a home with more than one living unit and you intend to occupy at least one of those units, you are free to rent out the unused space in the home under certain conditions. But you can’t use an FHA mortgage to buy a house you won’t occupy yourself as the borrower.
FHA loan rules governing these issues are found in HUD 4000.1 which reminds us that owner-occupied properties with up to four units can be purchased with an FHA mortgage. A reading of the rules in this area shows that there is no prohibition against renting unused living units in a home purchased with an FHA mortgage.
But there are issues--renting these units out is also subject to FHA loan rules in addition to lender requirements and state law. Do you know what HUD 4000.1 says about using spaces in your home if purchased with an FHA mortgage?
You will not find certain space-sharing or apartment-sharing apps mentioned by name in HUD 4000.1, but the FHA Lender’s Handbook does mention certain practices that are not allowed. And some of those practices relate directly to enterprises like Airbnb.
No, HUD 4000.1, the FHA loan Single-Family Lender’s Handbook, does not address Airbnb by name. Nor does it mention social sharing networks. What HUD 4000.1 does say about renting out the unused units in a multi-unit property? These rentals cannot be “transient” occupancy types that are 30 days or less.
In one section of the FHA loan rules, hotel/transient/intermittent occupancy uses are specifically referenced. The FHA will not approve Single-Family Home Loans for the purchase or refinance of:
- boarding houses
- tourist houses
- private clubs
- bed and breakfasts
- other transient housing
- vacation homes
- fraternity and sorority houses
Annual Income Requirements for FHA Loans
Good Credit History Helps Get FHA Loans
Stay Informed About Your Mortgage Closing Costs
Do you know what's on your credit report?
Learn what your score means.