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How to Get an FHA Loan For a Commercial Property

By Steve Matthews

Wednesday, February 1st, 2017

FHA home loans are not just for typical residential homes.  FHA insured mortgages are available for condos, multi-family and manufactured homes.

They are also, in some cases, available for property with commercial use. In some cases, a borrower might be interested in buying a home that is zoned in a commercial district, or there might be a need for a small storefront or commercial office space. FHA requirements do allow for such purchases as long as they fall within certain guidelines.

According to the FHA, “Properties zoned for commercial use are acceptable only if they are predominately residential in nature”.

That means no more than 25 percent of the total floor space can be non-residential. The FHA also says the use of such property as a residence (in an area with commercial zoning) must be legal, or “legal nonconforming”.

When it comes to commercial property versus private residential property, much depends on the appraiser. According to the FHA official site, “The appraiser’s site analysis must accurately reflect the attitude of the typical purchaser. Predominantly commercial locations subject to noise or other influences adversely affecting the use and enjoyment of the owner/occupant should be avoided. The appraiser must address the effect of the applicable zoning ordinances on the value of the property.”

When it comes to getting an FHA home loan for a property in a commercial zone, there’s no short answer. The appraiser is given flexibility to determine whether an FHA home loan would be appropriate for the property, which means the buyer must accept that such decisions are made on a case-by-case basis.

The FHA can and does approve loans on commercially zoned buildings deemed “primarily residential” in nature–something the borrower should always keep in mind when viewing such mixed-use buildings.