FHA CONDO LOANS
FHA Condominium Loans are specifically geared toward those who purchase housing units in a condominium building. Condominium ownership, in which separate owners of individual units jointly own the development's common areas and facilities, is for some a very popular alternative to home ownership.
These loans are designed to encourage lenders to extend affordable mortgage credit to those who have non-conventional forms of ownership. The Section 234(c) program insures a loan for 30 years to purchase a unit in a condominium building. The building must contain at least four dwelling units and can be comprised of detached and semidetached units, row houses, walkups, or an elevator structure.
Through this and other types of mortgage insurance programs, FHA helps low and moderate-income families purchase homes with FHA loans by keeping the initial costs down. By serving as an umbrella under which lenders have the confidence to extend loans to those who may not meet conventional loan requirements, FHA loan insurance allows individuals to qualify who may have been previously denied for a home loan by conventional underwriting guidelines.
FHA Rules for a Condo Loan
Many borrowers, especially first-time home buyers, gravitate toward buying a condo because the prices are generally much less than those for a single-family home. Because the prices are often lower, so are the down payment requirements. But other rules can affect a buyer's chance of getting a loan:
FHA Approved Condo List:
HUD requires the condo to be listed on its FHA approved condominium list. If the condo is not on the list, then the borrower will need to seek conventional financing.
Percentage of FHA Loans:
At least 51% of all FHA loans in the complex must be owner-occupied, the borrower's principal place of residence. If too many FHA-insured units are turned into rentals, FHA will not approve the loan.
No Spot Review:
Previously, if a condo wasn't on FHA's approved condo list, the FHA might still have made the loan upon review of a questionnaire. Unfortunately, FHA eliminated spot reviews, so now this option no longer exists for borrowers.
That all being said, if your condo qualifies for an FHA loan, then this program may be a great choice for you! Contact John to learn more, or give our office a call at (512) 524-8310.