August 5, 2015
We get frequent questions about FHA condo loans–are they available? What are the rules? It is true that FHA mortgage loans are available for condos, town homes and other properties that aren’t typical suburban homes. Condo loans have special rules due to the unique nature of these building projects.
The communal residency issues associated with condos (homeowner associations, shared roof repair costs and related upkeep issues, for example) requires any condo project for consideration for an FHA mortgage loan to conform with certain guidelines, which is why all condo projects must be on or added to the FHA approved list before a home loan can be approved for a unit in that project.
How does a condo get added to the FHA approved list? Before any decisions can be made, the project must be eligible. The FHA has a list of condo approval requirements in this downloadable PDF.
The eligible projects are listed as follows:
“Eligible condominium projects are those that have been declared and exist in full compliance with applicable state law requirements of the jurisdiction in which the condominium project is located, including good standing with the State, and with all other applicable laws and regulations.”
“FHA insures condominium single unit loans for up to 30 year terms to purchase or refinance a unit in an FHA-approved condominium project. The condominium project must be primarily residential, contain at least two (2) dwelling units and can be detached, semi-detached, a row house, a walk-up, mid-rise, high-rise, including those with or without an elevator, or manufactured housing”.
The FHA also has a list of ineligible projects to further clarify what it is looking for:
“FHA will not insure mortgages that are secured by units in certain types of condominium projects, regardless of the characteristics of the unit mortgage. Loans secured by units within the following types of projects are not eligible for FHA insurance. The list below is not an exclusive list of ineligible project types as there may be other projects with similar features that would be ineligible for FHA insurance. FHA reserves the right to determine the eligibility of condominium project types not addressed” by the list reprinted here:
–All projects not deemed to be used primarily as residential
–Projects with mandatory rental pooling agreements that require unit owners to either rent their units or give a management firm control over the occupancy of the units
–Projects that restrict the owners ability to occupy the unit
–Projects not primarily residential
–Condominium Hotel or Condotels
Projects that are managed and operated as a hotel or motel, even though the units are individually owned
–Projects with names that include the words hotel or motel;
–Projects that include registration services and offer rentals of units on a daily, weekly or monthly basis;
–Hotel or motel conversions (or conversions of other similar transient properties)
This is not an exhaustive, all-inclusive list, but it does give you a general idea of what qualifies and what does not for an FHA condo loan.
Do you have questions about FHA home 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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