September 12, 2014
A reader asks, “I live in a condominium of 275 homes. We are getting complaints from mortgage companies that we are not FHA approved. We meet all legal guidelines that are required just not for FHA approval.”
“We were told by someone that FHA has just recently stopped approving condos for mortgages, is this true? Also what is the percentage of FHA approved condos in Pennsylvania and what is the percentage of FHA approved condos in the entire United States. We have been told it was 10-20 percent. Also what are guidelines that a HOA must meet to be approved for FHA if it were to be considered. Thank you for your help in advance.”
We have seen no guidance from the FHA stating that condos would no longer be eligible for FHA loans. Borrowers who need to have a condo project added to the FHA approved list should discuss the situation with the lender. FHA loan rules state that eligible condo projects must meet a basic set of requirements:
“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.”
That’s from the FHA Condo Project Approval and Processing Guide, which also states:
“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:
–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 owner’s ability to occupy the unit
–Projects where more than 25 percent of the total space is used for nonresidential purposes
–Live/work units where more than 25 percent of the total project or unit square footage is used for nonresidential purposes
–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)”
As to other parts of the reader’s question, we have no way of knowing what percentage of condo projects in a give state or the whole country are considered to be on the FHA approved list. You can learn more about the guidelines for FHA approval of condo projects by downloading the Word doc found at www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-19ml.doc
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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