Low requirements for down payments and favorable credit scores can make Federal Housing Administration (FHA) loans attractive options for homebuyers. But these loans may not be suitable for all real estate investors because the conditions of the loans won’t allow it. Some homebuyers, however, may be able to take advantage of an FHA loan whether the home is their primary residence or produces income.
FHA Loans for Investment Properties: Can This be Done?
FHA loans are mortgages that are insured by the Federal Housing Administration and are often made for borrowers with less than ideal credit scores, including those with a history of bankruptcy. As such, these loans are typically only available for buyers with low to middle incomes.
FHA loans don’t require the borrower to make a down payment, except in specific circumstances. They also have lower interest rates and fees. And they are amortized over a 30-year period. Since these loans have lower requirements, there are only select circumstances when the properties they purchase may be used for investment properties.
FHA Occupancy Requirement
FHA loans are available to individuals who are looking to purchase a primary residence. If a home is serving as an investment property, then it is not considered a primary residence. To get an FHA-insured loan, a home must be lived in to be considered a primary residence.
In situations where a property is being bought for investment purposes, it may be possible for someone to reside in the property for a short period of time. These short stays would be considered temporary, and the borrower will have to move out of the home and intend to sell it once the home is purchased.
Some Exceptions to This Rule
There are some exceptions to this rule. One example that can make a property work as both a primary residence and an investment property would be for a couple to purchase a home together and one of them to live in the home and the other to rent it out. If the borrower resides in a co-owned property for three of the four months before putting the property on the market, then the property qualifies as a primary residence.
Another example of a property that can simultaneously be used as both a primary residence and an investment property is a home that is purchased for the borrower’s child to live in. If that child remains in the home for a three-month period after the buyer takes ownership of the home, then the home may be used to fulfill the FHA occupancy requirement.
Also, if you purchase the home to support your growing family, you can have some of the rooms in the home rented out for income.
Some FHA loans may be used to purchase properties that are also used for investment properties. As long as you have one or more high-quality tenants in the home, you may be able to move into the home yourself. The benefit to you could be enhanced cash flow and long-term growth.
Should you want to apply for FHA loans in Sacramento, visit Hawkins Home Loans. Whether you’re buying a home, refinancing, need cash from your home equity, Hawkins Home Loans is your online resource for a stress-free process, incredibly low rates and amazing service.