subject: Understanding Fha Condo Loans [print this page] Condos generally offer less maintenance and a more affordable purchase price. FHA loans allow a low down payment, flexible credit requirements, and low mortgage rates. The two should be a great combination for an economical home purchase, right? Well, maybe. Before planning on buying or refinancing a condominium with an FHA loan you need to understand that the guidelines have tightened, meaning it could be tougher than you expected to obtain a condo mortgage.
Is It On The Approved List?
The first thing to check is whether the condo project is on HUD's list of FHA approved condominiums. If it's not already approved the homeowners association can apply for approval, but be aware that this process can reportedly take two to three months. This isn't the route to take if you're in a hurry to get into your new home.
If you're just starting to look for a property start your search with this list. Even if you are planning to obtain conventional financing, or will be using the condo as a second home or investment property it's smart to check for the FHA approval. It will make the home much more marketable in the future should you want to resell it, and keep FHA financing an available option for refinancing.
Search for FHA approved condominium projects on HUD's website: https://entp.hud.gov/idapp/html/condlook.cfm
Does It Meet The Guidelines?
In order to qualify for an FHA condo loan the property will also have to meet the following guidelines:
At least 50% of the units must be owner occupied. No more of than 15% of the unit owners can be behind on their HOA dues (more than 30 days late.) This can be a big issue in areas that have seen falling property values and increased foreclosures in recent years. You may be able to get a bargain in the hard hit regions of the country, but a condo mortgage can be hard to come by. The home owners association must be financially solvent. No more than 10% of the units in the property can be owned by any one investor. No more than 25% of the area of the project can be used for commercial space. No more than 30% of the units can be financed with an FHA loan. (This has been temporarily increased to 50%.) You can check the percentage of existing FHA mortgages using the FHA approved condominium projects search on HUD's website.
If you already own a condo check with the condo board or home owners association to see if they have a current FHA approval for the complex. Even if you aren't planning on selling or refinancing immediately it is important for protecting your investment and that of your neighbors.
