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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, it is pertinent to know about the process to find FHA approved condos.
But can you use an FHA loan to buy a condo? Yes, absolutely. However, not all condos will qualify. You have to find those that are part of projects which are FHA-approved.
What are FHA-approved condos?
For starters, it’s essential to understand more about the Federal Housing Administration (FHA) home loan program.
“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
- Mandatory private mortgage insurance
- May enable the buying of too much house (more than someone could otherwise afford)
Now that you know what FHA loans are, FHA-approved condos are the single-unit condos that qualify for an FHA loan. When purchasing a condo using this program, you can reap the above benefits, but should also consider the drawbacks.
What are the FHA approval requirements?
For a condo project to qualify for FHA mortgage insurance, it must meet the following requirements:
- In full compliance with state law requirements and in good standing
- Primarily residential
- Minimum of two dwelling units
- Detached, semi-detached, high-rise (with or without an elevator), mid-rise, a walk-up, or manufactured
- Covered by hazard and liability insurance
See the full list of detailed requirements here.
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 time can take up to 30 days from the date HOC receives the package, but is subject to change based on the number of applications that are in processing 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.
How to find FHA-approved condos in 3 steps
How do you know if a condo 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.
HUD offers additional support online and via email at firstname.lastname@example.org. Further, if you have a real estate agent, they should also be able to provide you with FHA-approved condo listings.
VA Condo Approved List
Along with the FHA loan, VA loans are another option, which is backed by the government. This mortgage program is for veterans that 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 by 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.
However, there’s no requirement to private mortgage insurance due to the VA grantees the loan. If individuals using this type of financing are unable to make payments, the VA will work with the lender to alleviate the situation.”
FHA Approved Condos and Downpayments
You may, however, want to consider making a down payment on your VA loan– here are three reasons why.
Find the right mortgage lender for you
Government programs have helped many people, who otherwise would not be able, to get into homes. If you are interested in buying a condo, can qualify for FHA, and have found an FHA loan to be the best plan of action, the above steps can help you easily find condos in your area of interest.
Mark Ferguson, real estate agent and investor, says, “I think FHA is great for those who do not have perfect credit and need to qualify for a more expensive home.
FAQ on FHA Approved Condos
What are FHA approved condos?
FHA approved condos are primarily residential condominiums that meet the property eligibility requirements and are eligible to be purchased using an FHA Loan. The FHA insures one unit condos in which you can get a 15 year or 30 year fixed-rate mortgage.
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 many conforming mortgages require. Which is between 5 and 20 percent.
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). Processing time can take up to 30 days from the date HOC receives the package, but is subject to change based on the number of applications that are in processing and the HOC resources available at the time.
How do I know if a building is FHA approved?
Visit the HUD Condominiums website listed in the Resources section. You can search for the complex by city, state, zip code or name. Use the “Status” drop-down menu to ascertain if the complex is currently approved or pending approval, or if it was rejected or withdrawn from the approval process.
Is it hard to get FHA approved?
There are many differences in FHA vs Conventional loans. 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 very difficult to process a loan application with a credit score in this range.
For those with lower debt-to-income levels and really good credit, conventional may be a better option. Conventional loans have as little as 3% down and, in some cases, removable mortgage insurance and no upfront mortgage insurance.”
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By doing so, you can easily compare apples to apples to find the best fit for you.
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.