July 4, 2011
When an FHA loan applicant wants to get a condo loan, they are only permitted to get loans for FHA approved condominium projects. Condos must meet certain FHA requirements in order to be approved.
Those requirements aren’t limited to the usual minimum property requirements, they also include how many units can or must be sold with FHA insured loans and other rules unique to condominium loans.
One aspect of condo loans borrowers might not be aware of is that the FHA may withdraw its approval of a particular condo project. The property that fails to meet FHA requirements for approved condos may lose its approval, directly affecting those interested in purchasing units in that building and those who want FHA refinancing for units already purchased.
According to the FHA, “Generally, if approval of a condominium project has been withdrawn, FHA will insure only streamline refinances for that condominium project.”
That means a borrower cannot apply for credit-qualifying FHA refinancing for the unit such as cash-out refinancing loans. Since streamline loans are generally non-credit qualifying and do not result in cash back to the borrower, the FHA allows more flexibility with these types of refinancing loans.
The FHA rules do make allowances for a condo project to be reconsidered for approval. FHA rules say under “certain limited conditions” a rejected condo project or one that has had approval withdrawn may be reconsidered.
FHA rules do not allow approval for condominium hotels, time shares, segmented ownership, or projects that feature more than one home per condo unit. FHA loan applicants interested in purchasing a condo unit should not waste time on these types of properties as they don’t fit FHA requirements.
Buyers who currently own condo units where alterations to the property or the covenants/agreements that would result in a property becoming a time share, segmented ownership, or other ineligible project should be aware that such changes may affect their ability to refinance if the FHA withdraws its approval for that project.
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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