Properties That Don't Qualify for FHA Loans
Your options are subject to certain limitations in similar ways to conventional mortgages. The restrictions on conventional loans are typically different from government-backed mortgages, but the idea is the same. You need to know the rules of the home loan you seek.
For example, those seeking a One-Time Close construction loan are typically limited by lender standards to a home with a single living unit.
A multi-unit property is technically permitted under FHA and VA single-close construction loan rules. Still, lenders are often unwilling to issue One-Time Close loans for those multi-unit projects.
Ineligible Property Types for FHA Mortgages
What about purchase loans for existing construction? FHA loan rules indicate the first thing to know about ineligible property types is simple. You can’t buy a house with an FHA or VA mortgage (both government-backed mortgages) if you don’t intend to occupy it as your primary residence.
Other ineligible property types for FHA loans include manufactured homes older than June 15, 1976, and homes within designated special flood hazard zones or coastal barrier regions.
However, location and occupancy aren’t the only criteria for acceptability for an FHA mortgage.
FHA Loans Can’t Be Approved for These Properties
You cannot be approved for an FHA mortgage for a quasi-business/residential operation like a bed and breakfast or Air-b-n-b.
You can’t use an FHA loan to buy a frat or sorority house, a condo hotel, or any property used as a “transient occupancy” operation where tenants stay fewer than 30 days.
What to Know About FHA Loan Approval
FHA loans ARE permitted on mixed-use property, mixed-zoning property, or other arrangements depending on circumstances and whether the lender approves.
Any non-residential use of a mixed zoning home must be “subordinate” to the residential nature of the home, and non-residential use may be restricted to 25% of the total floor area or less, according to FHA literature.
Additional lender standards, state law, and other variables may also affect such transactions.
Get to Know HUD
Using an FHA Loan Calculator
Living in a Single Family Home
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