Can FHA Loans Be Used for Rental Properties?
Demand for new rental properties is almost always on the rise. In fact, more than 36 percent of households rent their homes and, with times being so uncertain, that number will only increase over the next few years. This creates a unique opportunity for people to get into the rental industry.
However, unless you plan to buy a rental with cash, you’ll need to finance the purchase with a home loan. Traditional mortgages are, of course, ideal for financing investment properties, but what about FHA loans? Here’s what you need to understand about using this financing option to pay for a rental property.
FHA Loans Are Meant for Primary Residences
The Federal Housing Authority expects that every buyer using an FHA loan to finance a home purchase use that home as their primary residence. This means you must plan to live in the house the majority of the year to qualify for the loan and you must maintain it as your primary residence for at least one year. If you want to use the property as a second home or an investment property, you’ll need to look for a different type of mortgage.
There Are Exceptions
Situations change and the government knows that there may come a time when someone who financed a house with an FHA loan needs to move but isn’t willing to sell the house outright. If this is the case, you may be able to rent the property out provided you’re relocating for work or some other necessary purpose.
Similarly, the FHA may allow you to rent out the home if you need to move because it no longer suits your needs. For example, if you have children and need more space or get in an accident and have mobility issues that make living in your current home no longer possible, you may be able to rent it out to tenants.
Multi-Family Homes Are an Option
For buyers wanting to generate immediate rental income, you’ll need to look into a multi-family home. As long as you live in one unit as your primary address for at least one year, you’re free to rent the others out to tenants as you see fit.
Get the Right Mortgage Now
Whether you’re looking at an FHA loan or want to buy a house with a traditional mortgage, you need to understand your options. Reach out today and let us help you find the right type of home loan for your needs.