January 26, 2016
FHA loans for condo projects are possible according to the FHA official site, but the condo unit you want to purchase must be on, or added to, the FHA approved condo project list.
There’s a very good reason why FHA requires a condo project to be approved–some condo projects have restrictions that are not permitted under FHA rules–such as any agreement that restricts the borrower’s ability to occupy the property once purchased, or freely dispose or sell the property as the borrower sees fit.
What does the FHA official site have to say about condo loans in general?
“Section 203 (b) of the National Housing Act provides authority to insure any mortgage covering a one-family unit in a project coupled with an undivided interest in the common areas and facilities which serve the project.”
As mentioned above, FHA condo loans are only available for eligible condo projects. What are those projects? The FHA official site has a set of criteria which includes the following basics:
“Eligible 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.”
A condo project that is not currently on the FHA approved list can be added to that list by your lender pending a review of condo association documents and other required paperwork. Any condo owner’s association agreement that contains a “right of first refusal” would be ineligible for an FHA loan as it restricts the borrower’s ability to sell the property. Additionally, any condo project that is essentially a hotel or “condohotel” would not be eligible. Nor are several other kinds of properties such as time shares or vacation residences.
For projects that are approved, what are the terms of an FHA condo loan? According to FHA.gov, “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 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.”
As you can see there is a good degree of flexibility in what the FHA may deem a condo unit or condo project. If you aren’t sure how the property you want to buy might qualify, speak to your loan officer about the specifics of your situation to see what kind of FHA mortgage loan or refinance loan might be right for you.
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
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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