September 7, 2017
Can I buy a condo unit with an FHA mortgage? Some people have a misconception about FHA mortgages, thinking they are intended for a certain income bracket, a certain type of home, or that it is possible to earn “too much income” to qualify for an FHA loan.
None of those things are true. You cannot earn too much money to qualify, and you can explore options to buy a variety of property types up to and including condominium units.
Yes, FHA condo loans are possible, but they have some unique requirements (see the section on the FHA “condo project approval” list) and certain property types may be listed as condos even if they are “detached dwellings”. The requirements for these units, sometimes known as “site condos” vary slightly from other FHA condo requirements as we will examine below.
FHA Home Loans For Condo Units
The FHA loan handbook, HUD 4000.1, has the rules for purchasing condo units with FHA mortgages. The section on condo loans starts with the FHA definition of a condominium-something that is important for borrowers to know since any property that meets these standards would be subject to condo loan rules and requirements.
“A Condominium Unit is a Property contained in a multi-unit project that has individually-owned Dwelling units, which may be either attached in one or more Structures or detached from each other, and is primarily residential in use.”
The FHA Loan Condo Project Approval List
Borrowers who want to buy a condo unit will be required to purchase a unit from a condominium project that is on the FHA approved list. Projects that are not currently listed at the time of inquiry may be added to the list if the project meets FHA specifications. You will work with your loan officer to have the project considered for addition to the approved list.
FHA Loan Condo Standard
The FHA loan handbook “standard” for condo developments includes the following:
“A condominium development 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 HOA that typically maintains the Property and collects assessments or dues from each unit owner.”
FHA loans for “site condos” are also possible. The definition of a “site condominium” is as follows:
“Site Condominiums are Single Family detached dwellings encumbered by a declaration of condominium covenants or condominium form of ownership and do not need to be FHA-approved. Manufactured Housing condominium units may not be processed as Site
Condominiums.”
Speak to a loan officer if you aren’t sure how these rules may affect your transaction or whether you need to have a condo project added to the FHA approved list.
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites; a widget that displays FHA loan limits for the counties serviced by those sites. It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease.
Get yours today:
http://www.fha.com/fha_loan_limits_widget
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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