FHA Investment Property

What does the FHA Consider investment property?

Any property like a duplex, an apartment building, commercial property, and vacant land that is purchased with the intention of getting a good return on the investment is considered an investment property. Making a purchase of investment property can be lucrative and with various methods one could purchase investment property. The purpose purchasing investment property is to resell at a premium or use it as a rental. The purchase of investment property is done with the sole interest of realizing an income.

Investment property is also referred to as a property, which is not occupied by the principal borrower as his/her primary residence, or as his/her secondary residence. The borrower, after getting permission from the appropriate HOC (House Opportunities Commission), be it private investors or any nonprofit organizations that does not meet the criteria as described in the paragraph 1-5 A, would be able to obtain FHA - insured mortgages due to the following reasons:

1. When a purchase of the HUD (Housing and Urban Development) Real Estate Owned (REO) property is made the owner occupancy is not required, and if the jurisdictional HOC wants to sell the property and give permission to the purchaser for obtaining a FHA-insured financing on the investment property.
2. To obtain streamline refinancing without any appraisal, one must refer to paragraph 1 – 12 and must get additional information on their qualifying for this program.
3. One should know what  the Underwriters Consider:

1. Those individual investors who do credit qualify after verification could be eligible to assume mortgages made on the investment properties. It also applies to the transactions that are made as described in paragraphs 1 – 4A and B, and also to the investment properties that would have been purchased before the 1989 ban on investors that was subsequently streamline refinanced.
2. The various ratios including the qualifying ratios and also the treatment of the projected rental income of the purchaser etc., all have been described in the Chapter 2 in paragraph 2 – 7 M.
3. In investment property the adjustable rate mortgages (ARMs) or the graduated payment mortgages (GPMS) are not permitted.
4. Streamline refinance, where the mortgage is originally insured in the business entity name only, except for such cases FHA would not insure the loans that are solely in the name of business (i.e proprietorship, partnership or a corporation) or a trust. The analysis is made based on the people involved i.e. the owner or co-owners of the business or the trust along with the business or trust would be analyzed for their worthiness.
5. The names of such individuals must appear as an owner and the name of the business entity or trust should appear in the mortgage note. The names of the individuals, business entity or trust could appear in the property title or deed. Those names that appear in the property title or deed must definitely appear on all the security instruments like mortgage, security deed, or deed of trust.