What Is a Single-Family Home Loan?
FHA Single-Family Home Loans
The technical definition of an FHA single-family home loan is that the property is a one-to-four-unit structure. As a condition of loan approval, the borrower will live in the property as their primary residence.
The fact that you can purchase a home with as many as four living units does not alter the “single family” nature of the property. One of the advantages of this type of loan is that the owner can rent out unused living units to other people.
You cannot rent out the entire property; occupancy is a requirement for FHA loans for homes with up to four living units. You cannot use an FHA single-family mortgage to purchase a non-residential business or a “transient occupancy” business like an Airbnb operation, bed-and-breakfast, etc.
The home must be primarily residential, and any non-residential use of the property must be “subordinate” to the residential use of the structure.
FHA single-family mortgages can be used to buy existing homes, build new ones, or renovate fixer-upper properties.
FHA Multi-Family Home Loans
By comparison, FHA multi-family homes are non-owner-occupied properties with five living units or more. Each unit must be compliant with FHA standards and local building code.
The home must have a functional kitchen and bathroom in each unit and there may be requirements for renovations or upgrades as a condition of loan approval depending on circumstances.
Multi-family home loans are said to be good for non-profit entities, healthcare operations, and special needs housing.
There are other FHA loan options for mortgages of this type, including loans for mobile home parks, rental housing, and cooperative units. Like the other types of loans mentioned in this section, these are not aimed at single-family borrowers.
Anyone who needs individual housing should explore their options under the FHA single-family home loan programs, such as the FHA 203(b) loan, the FHA 203(k) Rehabilitation Mortgage, or the FHA One-Time Close construction mortgage.
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