June 29, 2011
In previous blog posts, we’ve discussed the different types of FHA loans available and the various types of properties that can be purchased with an FHA insured home loan. Those properties include typical suburban houses, manufactured homes, multi-family units and condominiums.
FHA condominium loans are more complex than other loans because the FHA has requirements when it comes to these loans. Borrowers can’t purchase just any condominium unit–it has to be on the FHA’s list of approved condominium projects in order to be considered for an FHA mortgage. That’s one reason why the FHA publishes a searchable list of approved condo projects on its website at https://entp.hud.gov/idapp/html/condlook.cfm.
What does it take for a condominium project to be approved by the FHA so a borrower can apply for a loan to buy one of its units? According to FHA guidelines, “to be eligible for FHA mortgage insurance, the project must have been declared and exists in full compliance with applicable State law requirements of the jurisdiction in which the condominium project is located and with all other applicable laws and regulations.”
A condo project will not be approved by the FHA unless it has a minimum of two units, and is covered by hazard, liability and other insurance where applicable. Any space dedicated to commercial use must not be larger than 25 percent of the total floor space, and investor ownership of the property cannot exceed 10%. Additionally, at least half the units must be sold prior to the FHA’s endorsement of the first loan for a unit in that building.
Condo hotels are not eligible to be placed on the FHA approved condo project list, nor are timeshares, houseboat projects or condos that feature “more than one dwelling per condo unit”.
FHA loan applicants who are interested in an FHA condo loan are encouraged to use the approved condo list as a way to start searching for the right building in a particular area. The list can save a house hunter much time and energy–why look for buildings you aren’t sure are on the list?
The search tool at https://entp.hud.gov/idapp/html/condlook.cfm allows you to look up approved condo projects by condo name, state, zip code and other factors.
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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