Difficulty: Hard

Average Score: 33%

Which of the following property types is eligible for a Federal Housing Administration (FHA) purchase transaction?

Rationale

A condominium

Condos are eligible for Federal Housing Administration (FHA) purchase transactions, provided they meet specific criteria set by the FHA. This includes compliance with certain safety, affordability, and marketability standards, making them a viable option for FHA financing.

A (A condominium) CORRECT

Condominiums can qualify for FHA financing when they are part of an approved project. The FHA has specific guidelines regarding the management and financial health of the condominium association, ensuring the investment is sound for both the borrower and the lender.

B (A vacation property) YOUR ANSWER

Vacation properties typically do not qualify for FHA loans, as these loans are intended for primary residences only. The FHA aims to help borrowers purchase homes they will occupy as their main living space, not properties used for seasonal or occasional stays.

C (A mixed-use property where 51% is for commercial use) YOUR ANSWER

Mixed-use properties that are primarily commercial (51% or more) do not meet FHA eligibility requirements. FHA loans are designed for residential properties, and the presence of significant commercial usage disqualifies the property from FHA financing.

D (A home that the borrower purchased for a relative's residence) YOUR ANSWER

FHA loans require that the borrower occupy the home as their primary residence. Purchasing a home solely for a relative's use does not satisfy this requirement, thus making it ineligible for FHA financing.

Conclusion

The Federal Housing Administration (FHA) provides financing options primarily for properties intended to be used as the borrower's main residence. Among the choices presented, only a condominium can qualify for FHA purchase transactions, provided it adheres to FHA regulations. Other options—vacation properties, mixed-use commercial properties, and homes bought for relatives—do not meet the necessary criteria for FHA loans.

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