FHA loans are available for certain condominiums throughout the US. They are a great option for those seeking lenient credit score requirements and lower down payment requirements. You can find FHA-approved condos through Realtors and other real estate agents or by using the search tools we mention throughout the article. Read on to find out more about the FHA approval process and see if this option is right for you!
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You may already know that the Federal Housing Administration (FHA) helps buy a home, as about one-fifth of home purchase transactions are by FHA loans. Therefore, the process for finding an FHA condo is pertinent to your search for a condominium property you can finance.
But can you use an FHA loan to buy a condo? Yes, absolutely. They are not just for traditional, single-family homes. However, not all condos will qualify, so it may not be an immediate option for your dream condo. You have to find properties that are part of a condominium project that is FHA-approved.
What to Remember
- FHA-approved condos are those that can be purchased with an FHA loan. Not all condos qualify.
- You’ll need to find approved condo buildings and get approved for an FHA loan using the tools below.
- VA loans are another way to purchase a condo with a lower down payment.
- Once you find an FHA-approved condo, you can proceed with comparing the mortgage lenders with the best rates and terms.
What are FHA-approved condos?
For starters, it’s essential to understand more about the Federal Housing Administration (FHA) home loan program. You have access to all pertinent information and homebuying tips through the FHA online site.
“The FHA Mortgage is commonly associated with first-time homebuyers. However, everyone can use it. The down payment requirement for this type of alternative mortgage starts as low as 3.5%, with the purchase of private mortgage insurance being a requirement,” says Rhett M. Struve of Keller Williams Premier Realty.
He adds, “FHA Mortgages are easier to qualify for, mostly because the credit score prerequisites are lenient.” The requirements are more lenient because the FHA insures the mortgage, helping to reduce the risk carried by the third-party lender.
The main pros and cons of FHA loans are as follows:
Compare the pros and cons to make a better decision.
- 5% down payment with a credit score as low as 580
- 10% down payment with a credit score as low as 500
- Lower interest rates
- Higher debt-to-income ratios accepted
- Assistance programs, gifts, and grants can cover the down payment costs
- The seller can pay up to 6% of closing costs
- Lenient credit score prerequisites
- More accessible to those with debt from student loans
- More accessible to those with debt from credit cards
- Available through a Realtor or other real estate agent
- Mandatory private mortgage insurance
- May enable the buying of too much house (more than someone could otherwise afford)
So now you know what FHA loans are. An FHA-approved condo is a single-unit condo that qualifies for an FHA loan. When purchasing a condo using this program, consider the benefits and disadvantages mentioned above.
Mortgage lenders that consider FHA loans
You could be forgiven for thinking that all FHA lenders offer the same deal, but you would be wrong. It’s a good idea to get quotes from at least three lenders. Interest rates, closing fees, and other costs can vary substantially from one lender to another. The lenders below are a great place to start.
What are the FHA approval requirements?
For a condo project to qualify for FHA mortgage insurance, it must meet the following requirements:
- Condo buildings that fully comply with state requirements and are in good condition. Units that need substantial repairs may be eligible for an FHA 203K loan.
- Primarily residential
- Minimum of two dwelling units in the condo development
- Detached, semi-detached, high-rise (with or without an elevator), mid-rise, walk-up, or manufactured condominiums
- Covered by hazard and liability insurance
- Be aware of the FHA Amendatory Clause
How long does it take to get FHA approval for a condo?
According to HUD, parties that are interested in applying to have their condo project qualify for FHA insurance must submit all the information required to the FHA Homeownership Center (HOC).
Processing can take up to 30 days from the date HOC receives the package, but this is subject to change based on the number of applications being processed and the HOC resources available at the time.
Who are FHA-approved lenders?
Where can you go to find the lenders that offer FHA loans?
HUD provides a page on its website where you can search for FHA lenders by name, location, insurance type, service-originator type, and more.
Also, this page will show a list of lenders that match your criteria along with their contact information.
Here’s how you can do so in three easy steps.
How to find FHA-approved condos in 3 steps
As a home buyer, how do you know if a condo unit is FHA-approved?
First, visit the U.S. Department of Housing and Urban Development (HUD) website and navigate to the “Condominiums” page.
Then, fill in at least one of the fields and click “Send.”
You can search for a specific condo name or ID or get a list of condos by state, county, zip code, etc. The less information you enter, the broader the results will be.
Finally, review the results and click on individual listings to get more information.
VA condo approved list
Along with the FHA loan, VA loans are another option, backed by the department of veterans affairs. This mortgage program for veterans also allows for the purchase of condos.
VA loans offer even more significant benefits than FHA, such as 0% down and no mortgage insurance required, but you must be a vet. Qualified borrowers can find eligible condos by visiting the web page found here and performing a search or simply asking a real estate agent.
“The Veterans Affairs Loan (VA Loan) was created in 1944 by the U.S. government as a way to make it more practical for military personnel to purchase a home. Unsurprisingly, you are required to be a veteran to obtain this type of financing,” says Struve.
He adds, “Perhaps the most significant benefit of a VA Loan is that it does not require a down payment. A 0% down payment, there has to be a catch, right? Well, kind of a catch. Veterans who are utilizing this option for the first time are required to pay a ‘fee’ of 2.15% of the loan amount, and 3.3% for any real estate purchase after that.”
FAQ on FHA approved condos
Below are some frequently asked questions specific to FHA condos. For more info on FHA loans in general, try checking out this helpful article.
What are FHA-approved condos?
FHA-approved condos are primarily residential condominium projects that meet the property eligibility requirements and are eligible to be purchased using FHA loans. The FHA insures one-unit condos for which you can get a 15 year or 30-year fixed-rate mortgage.
Can a first-time homebuyer get FHA approved?
Yes. In fact, FHA loans are frequently associated with first-time homebuyers. They are a great option because of the lower down payments and flexible credit requirements.
How do condos get FHA approved?
To buy a condominium with an FHA loan, the condo must be approved by HUD. FHA financing is much easier to qualify for than a traditional mortgage because the guidelines are more flexible. A down payment of just 3.5% is required, much less than the 5–20% many conforming mortgages require.
Are all condominium projects FHA approved?
No. It all depends on the individual condominium project on a case-by-case basis. Most cities or states will have a local search tool site to browse through a condo list where you can find condo associations that qualify for FHA approval. This makes finding an FHA condo substantially easier and more convenient.
How long does it take to get a condo FHA approved?
According to HUD, parties that are interested in applying to have their condo project qualify for FHA insurance must submit all the information required to the FHA Homeownership Center (HOC). The condo approval process can take up to 30 days from the date HOC receives the package, but this can change based on the number of applications being processed and the HOC resources available at the time.
Can you purchase a condo with an FHA loan? Is it hard to do?
Purchasing a property with an FHA loan does require a few additional steps compared to a traditional mortgage, but this does not mean it is overly difficult. A Realtor can help walk you through the process to get the condo loan that best fits your needs and individual situation.
How do I know if a property is FHA approved?
Visit the HUD Condominiums website listed in the Resources section. You can search for an entire complex or specific properties by city, state, zip code, or name anywhere in the country. Use the “Status” drop-down menu to ascertain if the project is currently approved or pending approval or if it has been rejected or withdrawn from the approval process. There are also many other tools available to help you find a condo association in certain areas.
Is it hard to get a condo FHA approved?
A condo and the project it’s part of must meet some very specific requirements for FHA approval. You may review the full list of detailed requirements here. Some states, including Texas and Ohio, have specific requirements of their own.
Do these requirements mean that it’s “hard” to get a condo approved? We’ll leave that question to linguists.
What if a condo is not FHA approved?
If you want to purchase a condominium with an FHA loan, you need to find an FHA-approved condo. So if the condo you want is not FHA approved, you’ll need to check whether you qualify for a conventional loan or some other program with preferential rates and eligibility requirements. Fortunately, you have many alternatives to consider. The lenders below provide access to a wide selection of mortgage programs.
Is it hard to get FHA approved?
There are many differences between an FHA mortgage and a conventional mortgage. For one, FHA requires a low down payment of just 3.5% with a 580 credit score. You can get approved for an FHA mortgage loan with a 500–579 credit score with 10% down. However, it is challenging to process a loan application with a credit score in this range.
For those with lower debt-to-income levels and excellent credit, conventional may be a better option. Conventional loans have as little as 3% down and, in some cases, removable mortgage insurance or even no upfront mortgage insurance.
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Jessica Walrack is a personal finance writer at SuperMoney, The Simple Dollar, Interest.com, Commonbond, Bankrate, NextAdvisor, Guardian, Personalloans.org and many others. She specializes in taking personal finance topics like loans, credit cards, and budgeting, and making them accessible and fun.