I Want to Buy with an FHA Mortgage

Posted by  on Jul 25, 2010

I want to buy a home and get an FHA mortgage. Can I use this loan for any kind of property?

Buying a home with an FHA loan means you can't purchase property that doesn't meet FHA's guidelines. If you buy a condo, newly-constructed home, manufactured home, or fixer-upper, you have different concerns. FHA appraisals are more extensive than conventional appraisals and address additional 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, as well as its collateral, FHA imposes certain requirements that new home builders must meet. HUD requires the property to be pre-approved before construction begins. At a minimum the initial, framing, and final inspections must be completed. If the property is not pre-approved with evidence of the required inspections, then the home must pass a final inspection and a HUD-approved 10-year warranty must be supplied. New homes in areas with termites must have the soil treated for termites. If you want to buy such a home, make sure it's FHA-approved before making your offer, or make it contingent on obtaining FHA financing. Note that FHA no longer pre-approves entire subdivisions.


FHA must approve the condominium or you can't get an FHA loan. To see if a condo is approved, you can check on HUD's website; there's a condo search page. If your FHA-approved lender has direct endorsement authority, it is allowed to approve a condo project on HUD's behalf. Condominiums 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 homeowners association (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 must be affixed to an approved permanent foundation and taxed as real property. It must have been constructed after June 15th, 1976, and have a 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). Manufactured housing can't be located in a flood zone and be FHA-financed.

Other Property Issues

Well inspection may be required depending on location and drilling date. Pump tests are required where water availability is an issue. A pump test involves testing for adequate flow and volume of water over several hours. Homes with septic systems are eligible for financing but the tank must have been pumped and inspected within the last five years. Roofs must have at least three years' life remaining. Flaking paint or earth-to-wood contact must be resolved before the loan can close.

This is a short list of the most common property issues that FHA buyers encounter but it's far from complete. The bottom line is that when you shop for a home loan and compare mortgage rates, make sure you work with an FHA-approved lender. When you make an offer on a home, it should be contingent on you being able to obtain FHA financing. And just be aware that any property you select must pass muster with FHA.


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