FHA Commercial Loans
FHA loans are government-backed financing options guaranteed by the Federal Housing Authority. Although they are offered through lending institutions, the FHA, rather than the borrower or the lender, takes on any possible financial risk associated with these loans.
Many borrowers are familiar with FHA loans for residential real estate purchases, but did you know that you can obtain an FHA loan to buy commercial property? These loans might be a viable option for business owners and investors who are prepared for the long-term financial responsibility of a new property but lack immediate cash to complete their purchase.
Several variations of FHA commercial loans exist to suit your borrowing needs. These are the types of commercial properties that the FHA will fund:
- Healthcare facilities
- Existing multifamily rental housing
- New construction of multifamily rental hosuing
FHA commercial loans are an attractive financing option for investors. Here are a few of their advantages:
- Flexible qualification criteria: Since these commercial loans are guaranteed by the FHA, lenders are willing to relax borrower eligibility requirements and make it easier for borrowers to qualify.
- Affordable down payments: Borrowers can receive financing with a down payment of as little as 3.5%.
- Lenient credit score requirements: The FHA is typically forgiving toward borrowers with previous credit concerns.
- Gifted funds are permitted: Borrowers can use money from a family member, employer, or charity to cover the required down payment.
- Competitive interest rates: Since FHA commercial loans are guaranteed by the federal government, they often come with lower interest rates than other loan options, leading to lower monthly payments.
If you plan to apply for an FHA commercial loan, be prepared with the appropriate documentation to ensure a smooth, speedy approval process. Here are the things you’ll need to complete your application:
- All borrowers require a two-year written income and employment history that explains any unemployed period that lasts more than 30 days.
- All borrowers must also produce a pay stub dated within the past 30 days that indicates total earnings for the year.
- If you receive a salary, you must provide W-2 tax forms from the previous two years.
- If you are self-employed, you must provide all applicable tax return documentation from the previous two years.
If you are a property investor looking to expand your real estate portfolio, an FHA loan might help you reach your goals. Contact us today to see if you qualify for this flexible financing option.