Eligible Property Types

To be eligible for purchase by Fannie Mae or Freddie Mac, a security property must be a residential dwelling consisting of one to four units. The structures can be detached, attached, or semi-detached. The property must be located within the 50 United States, the District of Columbia, or specified territories like Puerto Rico, the U.S. Virgin Islands, or Guam. Fundamentally, the property must be residential in nature, meaning it is not primarily agricultural or commercial, and it must be safe, sound, and structurally secure. Additionally, the property must be readily accessible by roads that meet local standards and served by adequate utilities.

Modular, prefabricated, panelized, or sectional housing is eligible and is generally treated the same as site-built housing rather than manufactured housing. Unlike manufactured homes, which are built to the Federal HUD Code, these homes must be built under the International Residential Code (IRC) or local building codes administered by the state. Like other eligible properties, these units must be legally classified as real property and permanently attached to a foundation. Appraisers evaluate these properties by comparing them to site-built housing, and there are typically no unique restrictions on size or width as there are for manufactured homes.

Yes, individual units in condominium and co-op projects are eligible, but the project itself must undergo a review to ensure it meets financial and legal standards. Lenders analyze factors such as the project’s insurance coverage, the percentage of commercial space (typically limited to 35%), and the delinquency rate of homeowner association dues. For co-ops, the loan is secured by the shares in the corporation and the proprietary lease. Projects with significant litigation involving safety or structural soundness, or those operating as condo hotels, are generally ineligible for financing.

Properties that have a business use in addition to their residential use are eligible under specific conditions. The property must be a one-unit dwelling that the borrower occupies as a principal residence. Crucially, the borrower must be both the owner and the operator of the business located on the property. The property must remain primarily residential in nature, and the business use should not adversely affect the marketability of the property as a residence. Examples of acceptable mixed-use properties include homes with space set aside for a doctor’s office, beauty shop, or day care facility.

Yes, a one-unit property that includes an accessory dwelling unit (ADU) is eligible for conventional financing. An ADU is an additional living area that is independent of the primary dwelling, such as a basement apartment, a garage apartment, or a backyard cottage. The ADU must include a kitchen, bathroom, and sleeping area, and it must be subordinate in size to the primary dwelling. Generally, only one ADU is permitted per parcel. If the ADU is a manufactured home, it must be legally classified as real property and meet specific foundation requirements.

Fannie Mae and Freddie Mac prohibit financing for properties that are not residential in nature or pose unique risks. Ineligible property types include vacant land, agricultural properties such as farms or ranches, and properties that are not readily accessible by roads. Additionally, units in condo hotels, timeshares, houseboats, and boarding houses are not eligible. Properties with a condition rating of C6, indicating substantial damage or critical repair needs that affect safety, soundness, or structural integrity, are also ineligible until the necessary repairs are completed to improve the condition.

Yes, a property consisting of more than one parcel of real estate is eligible if the parcels are adjoined and are conveyed in their entirety as a single transaction. The parcels must generally have the same basic zoning. While parcels usually must be contiguous, they may be divided by a road if the non-residential parcel is a non-buildable lot, such as a waterfront parcel providing water access. The entire property may typically contain only one dwelling unit, although limited non-residential improvements like a garage on the adjoining parcel are acceptable.

While most borrowers own the land their home sits on (fee simple), Fannie Mae and Freddie Mac also purchase mortgages secured by leasehold estates, where the borrower owns the improvements but leases the land. To be eligible, the lease must meet strict requirements to protect the lender’s interest. Most importantly, the term of the lease must typically exceed the maturity date of the mortgage by at least five years. Community Land Trusts are a specific type of eligible leasehold designed to preserve long-term affordable housing, often involving resale restrictions.

Yes, conventional loans are available for properties with up to four dwelling units, covering duplexes, triplexes, and fourplexes. These properties must be residential in nature. While a borrower can purchase a 2-4 unit property as a principal residence (occupying one unit and renting the others), they can also finance them as investment properties, though this typically requires higher down payments and reserves. When appraising these properties, lenders use the Small Residential Income Property Appraisal Report (Form 1025) to evaluate the income potential of the rental units alongside the property value.

Yes, manufactured homes are eligible if they meet strict criteria. The home must be built on a permanent chassis and attached to a permanent foundation system, assuming the characteristics of site-built housing. Crucially, the home must be legally classified as real property under state law, and the towing hitch, wheels, and axles must be removed. The unit must be a one-unit dwelling and generally must be at least 12 feet wide with a minimum of 400 square feet of living area.