FHA Loan Requirements for Various Types of Homes

Buying or refinancing a home with an FHA loan means you can't finance property that doesn't meet FHA's guidelines. If you buy a condo, multi-unit property, newly-constructed home, manufactured (mobile) home, or fixer-upper, you have different concerns.

Brand-New Home or Home Under Construction

If you buy from a developer, your home may be newly-built or still under construction. To protect you, FHA imposes certain requirements that new home builders must meet. The property must be pre-approved before construction begins, with at least three inspections -- initial, framing, and final. If the property is not pre-approved, a final inspection must be passed AND the builder must supply a HUD-approved 10-year warranty. New homes in areas with termites must have the soil treated for pests. If you wish to buy a newly-built home, make sure it's FHA-approved before writing your offer, or make the sale contingent on you obtaining FHA financing. Note that FHA no longer pre-approves entire subdivisions.

Condominiums

FHA must approve the condominium project, or you can't get an FHA loan. To see if a condo is approved, you can check on HUD's Web site; there's a condo search page. If your FHA-approved lender has direct endorsement authority (ask when you shop for your FHA mortgage), it is allowed to approve a condo project on HUD's behalf. Condominium developments are approved based on their financial soundness and safety. For example, one of the requirements is that no more than 15% of the units can be delinquent on their HOA dues. Another is that at least 50% of the units must be owner-occupied. FHA approval is one way of assuring yourself that your new condo is part of a viable association.

Manufactured Housing

Manufactured housing or a mobile home must be affixed to an approved, permanent foundation and taxed as real property (if you send your fees to the DMV, your home is NOT real property). It must have been constructed after June 15th, 1976, and have a tag (called a HUD tag) proving that it meets safety standards issued after that date. The mortgage must cover both the home and the property (you can't mortgage mobile homes in trailer parks with an FHA home loan but you can finance them as personal property with a Title 1 loan). Manufactured housing can't be located in a flood zone to be FHA-financed.

Duplexes, Triplexes, and Four-plexes

FHA mortgage limits are higher for multi-unit properties. For example, in Reno, Nevada, the limit for a one-unit home in 2012 was $403,750, for duplexes, it was$516,850, for triplexes,$624,750, and for four-plexes it was$776,450. FHA loans can be used for owner-occupied homes only, but by purchasing a multi-unit property and living in one unit, you can effectively use an FHA loan with a 3.5 percent down payment to buy rental units. In addition, FHA lets you count 75 percent of the rent generated by the other units as qualifying income when you apply for financing.

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