FHA loans are a terrific option for home buyers with lower incomes, imperfect credit ratings or limited cash available for a down payment. In fact, FHA loan requirements feature a certain flexibility which makes them the only option available for millions of American mortgage applicants with “average” qualifications. That’s why FHA loans jumped in popularity after the 2008 financial crisis when subprime mortgage options were eliminated. Read More
FHA loans are a great way to purchase a new condo with a small down payment, or refinance a condo will a small amount of equity. FHA approved condos contain a few key characteristics that make FHA condo loans unique to other mortgage programs.
What are FHA approved condo projects?
Federal Housing Authority insures mortgages up to 30 years in length to purchase or refinance a single unit in an FHA-approved condo complex. For a condo to be approved for an FHA loan, it must first meet guidelines for HUD approved condos. Once a complex is approved, it’s residential units are available for FHA financing.
What are the FHA condo approval guidelines?
- Condominium complex must contain 2 units or more
- Less than 25 percent of the total complex or unit square footage may be used for nonresidential purposes (exceptions up to 50% may be allowed)
- No more than 10% of condo complex’s units can be owned by one party
- No more than 15% of condo complex’s combined HOA dues can be delinquent
- At least 50% of the total complex units must be owner occupied, or under contract to sell to owner occupants
- Timeshares and condo projects managed as hotels or motels are also ineligible, even if the units are individually owned.
- Condo building configuration can be detached, semi-detached, row house, mid-rise or high-rise.
- All condo units must meet state law requirements for liability insurance, hazard insurance, flood insurance, as determined by HUD
- Condo project finance documents are reviewed including budget, balance sheet, income and expenses.
- FHA approved condo complexes must be re-certified every two years for HUD compliance
How do you know if a condo is FHA approved?
HUD maintains a list of approved FHA condos around the country. If the subject property isn’t on the HUD FHA approved condo list, it’s still possible to get an mortgage approval if the lender does a little more legwork. The lender, realtor or HOA can initiate application for FHA condo approval for the entire project through the “HUD Review and Approval Process” (HRAP) or the lender can attempt a “Site Condo” approval through the “Direct Endorsement Lender Review and Approval Process” (DELRAP).
You can lookup HUD approved condos for all 50 states through the links below.
FHA Approved Condos