FHA Loans for Unique Properties

Thinking about buying a log home, tiny house, or a property with acreage or a business space?  These are considered unique properties by your lender, and special considerations or financing may be required.

Maybe you’ve come across a property with lower ceilings or something a little outside the box. If you’re planning to use an FHA loan, it’s crucial to know what’s allowed and what’s not.

FHA loans do allow financing for unique properties, but only if they meet specific criteria. Skip these rules and you risk wasting time—and possibly money—on a home that won’t qualify.

Let’s break down what FHA financing will and won’t cover, what to watch out for, and how to move forward confidently with your home purchase.

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What Types of Unique Properties Can Be Financed with an FHA Loan?

FHA loans aren’t just for cookie-cutter homes in suburban neighborhoods. Certain non-traditional homes can qualify, but they must meet guidelines related to safety, marketability, and comparability.

Log Homes
These rustic retreats can be financed with an FHA loan as long as they are:

• Structurally sound

• Marketable within the area

• Surrounded by similar home sales (aka comps) to support the appraised value

Tiny Homes
Tiny homes can qualify if they are:

• Permanently affixed to a foundation

• Up to local building codes

• Comparable tiny homes exist in the market

Homes With Lower Ceilings
Some older homes or custom builds have ceilings lower than today’s standard heights. These may still be eligible as long as:

• They meet minimum FHA height requirements

• The home passes structural and safety inspections

Properties With Mixed Residential and Business Use
You can use FHA financing for a property that includes space for a small business—like a storefront, studio, or office—if:

• Business use occupies 49% or less of the total square footage

• The property still looks and functions as a home

• The business complies with local zoning laws

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What FHA Loans Won’t Finance

While FHA loans are fairly flexible, there are some clear lines they won’t cross.

Shared Ownership Lots
If the legal description of the property includes phrases like “undivided half interest” or “undivided third interest,” it won’t qualify. FHA requires you to have full ownership of the property—not just a slice.

Land Classified as Excess
FHA will include land in the appraisal—but only the amount that’s considered typical for the area. If your dream property sits on a large lot and part of it is determined to be excess land (meaning it could be sold separately), that portion won’t be counted in the appraised value. As a result, you may not be able to borrow as much as you hoped.

Homes That Have Been Moved
Stick-built homes that have been relocated can qualify, but only if:

• The move was approved by HUD

• The home has been on its new foundation for at least one year (to qualify for full 96.5% financing)

• If less than a year, only 90% financing is available

• Any damage caused during the move must be repaired, either by the lender or via an FHA 203(k) renovation loan

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What About Farms or Properties with Forest Tax Deferral?

If a property is enrolled in a farm or forest tax deferral program, it doesn’t automatically disqualify you from FHA financing. However, there are important rules:

• If agricultural use will continue, FHA can approve the loan

• If agricultural use is ending, all deferred taxes must be paid by the seller before closing

This ensures there’s no lingering tax liability for the buyer.

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Key Steps Before Buying a Unique Property with an FHA Loan

If you’re eyeing a non-traditional property and planning to use FHA financing, take these steps before making an offer:

Verify the Property Type
Whether it’s a log cabin, tiny home, or a mixed-use space, confirm that the structure meets FHA standards for safety, stability, and compliance with local codes.

Check for Comparable Sales
Even if the home is FHA-eligible in theory, your loan may get denied if the appraiser can’t find similar homes nearby to justify the value.

Evaluate the Land Situation
If the home sits on a large lot, ask whether any of the land is considered “excess.” This will affect how much you can borrow.

Understand Business Space Limits
For homes with commercial space, ensure that business usage does not exceed 49% of the total square footage.

Choose a Lender Who Knows FHA Rules
Not all lenders are comfortable or experienced with financing unusual properties. Find a loan officer who understands FHA guidelines inside and out and can advocate on your behalf.

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Why All of This Matters

Buying a unique property can be incredibly rewarding—but only if you’re financially prepared. FHA loans are a popular option, but they come with fine print that can catch buyers off guard.

From ceiling height to land classification, every detail matters. That charming cabin in the woods or downtown live/work loft might seem perfect—but if it doesn’t tick the right boxes, your loan could fall through at the last minute.

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Let’s Make Your Unique Home Purchase a Success

Are you considering a property that doesn’t fit the typical mold? Don’t go it alone.

Schedule a call with me today and I’ll help you:

• Determine if the property qualifies for FHA financing

• Review how much you can borrow

• Walk you through each step of the FHA process, especially the parts that apply to unusual homes

With expert guidance, buying a unique home doesn’t have to be stressful—it can be the adventure you always dreamed of.