April 1, 2013
There are many different types of property you can buy with an FHA mortgage. Some borrowers are interested in suburban homes, others want a condo unit within the city. FHA loans do permit borrowers to buy condominium units with an FHA guaranteed mortgage, but there are additional rules for these purchases.
One of the first things a borrower learns about purchasing a condo unit with an FHA mortgage is the rule found in HUD 4155.1 Chapter Four, Section B. It says, “FHA must approve condominium projects before a mortgage on an individual condominium unit can be insured.” Discuss this requirement with your loan officer to learn more about the FHA approval process and how it works in cases where the condo isn’t currently on the “approved” list.
The approval issue raises an interesting question. What does the FHA consider a condo unit? What happens if the borrower wants to purchase something which may or may not fit the FHA description of a condo project? For the answers, we turn again to Chapter Four of HUD 4155.1, which defines the nature of a condominium.
“A condominium is a multi-unit project that
• has individually-owned units, which may be either
− attached in one or more structures, or
− detached from each other, and
• is essentially residential in use (for FHA purposes).”
Additionally, Chapter Four says, “A condominium regime is created by state or local law and is characterized by fee simple ownership of a unit which is defined in the condominium documents, together with common areas. The property interest in these areas is both common and undivided on the part of all unit owners, each of whom belongs to the Homeowners’ Association (HOA) that typically maintains the property and collects assessments or dues from each unit owner.”
If the property you want to purchase falls into that description, it will be affected by FHA condo loan requirements. But what about the type of property known as “site condominiums”? The FHA defines a site condo as follows:
“Site Condominiums are single family totally detached dwellings encumbered by a declaration of condominium covenants or condominium form of ownership. They have no shared garages or any other attached buildings. Project approval is not required for site condominiums unless they do not meet this definition.”
Note the last line about project approval–that is very important for borrowers interested in this type of property. For more information on FHA condo loan requirements, speak to a lender or contact the FHA directly at 1-800 CALL FHA.
Do you have questions about FHA loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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