Ways to Use an FHA Mortgage
May 14, 2023
There are many ways to use an FHA home loan. Do you know all your options? Some borrowers don’t even consider their ability to afford a condo unit, townhouse, or a (mostly residential) mixed-use property with an FHA mortgage.
What’s the down payment like on a conventional condo loan? Compare it to the FHA’s minimum 3.5% down requirement and see if it makes sense to apply for an FHA loan instead.
For some borrowers, the choice is obvious. But others might not know the full range of options available under an FHA mortgage. Here are some of them.
Buy a Multi-Unit Property
FHA loan rules allow you to buy or renovate a home with up to four living units with an FHA Single-Family Mortgage. You are technically allowed, under FHA loan rules, to build a home with up to four living units (multi-unit property) with an FHA One-Time Close Construction Loan, but many lenders restrict this option to single-unit properties.
Buy a Condo or Townhouse
As mentioned above, there are FHA loans for condos and townhomes. These loans have the same FICO score and down payment requirements as any other FHA mortgage, but the loans are tailored to the property type.
For example, an FHA Condo Loan requires the borrower to freely sell or dispose of the condo unit without restrictions from a condo owner’s association. This can be an advantage for the borrower concerned about restrictive covenants that might be allowed with some conventional mortgages.
Buy a Home That Can’t Pass an Appraisal
If you are interested in buying a fixer-upper, there is an FHA Rehabilitation Loan that can help. You’ll be required to bring the home up to code and FHA minimum standards as a condition of loan approval, but this is a way forward for borrowers who worry the property might not pass the appraisal for an existing construction home.
Buy a Manufactured Home
Some people instantly think of the old-fashioned mobile home option when considering their options under an FHA Manufactured Home Loan, but there are more options available; houses that are delivered and assembled on-site that look more like typical suburban homes may be available at your price point with these types of FHA home loans.
The typical caveat applies here; the home must be affixed to a permanent foundation for loan approval. Whether that means being delivered and assembled on that foundation or buying a manufactured home that has already been through the process may depend on the nature of your transaction.
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What’s the down payment like on a conventional condo loan? Compare it to the FHA’s minimum 3.5% down requirement and see if it makes sense to apply for an FHA loan instead.
For some borrowers, the choice is obvious. But others might not know the full range of options available under an FHA mortgage. Here are some of them.
Buy a Multi-Unit Property
FHA loan rules allow you to buy or renovate a home with up to four living units with an FHA Single-Family Mortgage. You are technically allowed, under FHA loan rules, to build a home with up to four living units (multi-unit property) with an FHA One-Time Close Construction Loan, but many lenders restrict this option to single-unit properties.
Buy a Condo or Townhouse
As mentioned above, there are FHA loans for condos and townhomes. These loans have the same FICO score and down payment requirements as any other FHA mortgage, but the loans are tailored to the property type.
For example, an FHA Condo Loan requires the borrower to freely sell or dispose of the condo unit without restrictions from a condo owner’s association. This can be an advantage for the borrower concerned about restrictive covenants that might be allowed with some conventional mortgages.
Buy a Home That Can’t Pass an Appraisal
If you are interested in buying a fixer-upper, there is an FHA Rehabilitation Loan that can help. You’ll be required to bring the home up to code and FHA minimum standards as a condition of loan approval, but this is a way forward for borrowers who worry the property might not pass the appraisal for an existing construction home.
Buy a Manufactured Home
Some people instantly think of the old-fashioned mobile home option when considering their options under an FHA Manufactured Home Loan, but there are more options available; houses that are delivered and assembled on-site that look more like typical suburban homes may be available at your price point with these types of FHA home loans.
The typical caveat applies here; the home must be affixed to a permanent foundation for loan approval. Whether that means being delivered and assembled on that foundation or buying a manufactured home that has already been through the process may depend on the nature of your transaction.
------------------------------
RELATED VIDEOS:
You're Almost There When You Get Your Loan Approval
Learn About the Mortgage Insurance Premium (MIP)
Pre-approval Starts the Mortgage Process
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