Reader question: “We purchased a home a while back with an FHA mortgage loan. Now we would like to sell the home in order to relocate for work. Can I sell my house if I still have an FHA loan on it?”
The short answer is yes, in most cases it’s entirely possible to sell a home even if you’re still paying on FHA loan. There is no rule or requirement that says you cannot sell a house while you still have an FHA loan associated with the property.
But there are some “anti-flipping” restrictions to keep in mind if you plan to sell the property to a buyer who is also going to use an FHA loan. We’ll talk more about that below.
Can I Sell My House with an FHA Loan?
This is a question we have received numerous times over the years. It seems that a lot of home buyers and borrowers believe that they will be “locked” into an FHA loan for a certain period of time. In other words, they worry that they won’t be able to sell the home down the road because they have an FHA loan on the house.
But that’s not the case. You could certainly sell a house even if you still have an FHA loan.
There are some potential obstacles when selling a house. For instance, some people don’t have enough equity in their homes to do a traditional sale, so they might have to do a short sale. And it might be harder to find a qualified buyer in some slower markets. But having an FHA loan is generally not an obstacle for sellers. It’s your property, so you are entitled to sell it.
How This Mortgage Program Works
This might be easier to understand if we talk about what an FHA loan is and how they work.
The Federal Housing Administration does not actually lend money to borrowers through this program. They simply insure the mortgage lender against losses that might result from borrower default, or failure to repay. It is this government insurance that makes the program so flexible in the first place. (It’s generally easier to qualify for an FHA loan than conventional financing.)
So an FHA loan is basically just a mortgage with government insurance applied to it. And there’s nothing in the official “rulebook” that would prevent you from selling the home down the road.
HUD Discourages Property Flipping
So we’ve answer the primary question here. Can you sell a house if you still have an FHA loan? The answer is yes, in most cases this is entirely possible.
But if you’re going to sell the home to a buyer who is also using an FHA loan, there is a time requirement that has to be met. This is to prevent property flipping (i.e., the purchase and sale of a home with quick turnaround for profit purposes).
According to Part II, Section A-1 of the HUD Handbook 4000.1 (also known as the Single-Family Housing Policy Handbook):
“A Property that is being resold 90 Days or fewer following the seller’s date of acquisition is not eligible for an FHA-insured Mortgage.”
FHA Loans Are ‘Assumable’ in Some Cases
It’s also worth mentioning that FHA loans are assumable, in most cases. This means that if a person wants to buy the home you are selling — and they meet all of the minimum requirements for an FHA loan — they could essentially take over your mortgage loan payments.
Depending on the situation, this could offer several advantages to the person who is buying the home. They might end up with a lower mortgage rate than they would get if they took out a new loan. There are other potential benefits as well, but that’s a topic for another day.
Conventional loans on the other hand (those that are not insured by the government) usually are not assumable.