February 7, 2024
Do you need to learn how to buy a condo unit? Do you want to buy one with an FHA mortgage? The first thing to know is that FHA loan rules say condo units purchased with an FHA mortgage must either be on or added to the FHA approval list.
There are exceptions for condos not on the FHA list, and these may be handled on a case-by-case basis. Always ask the participating FHA lender about this issue as early as you can.
How FHA Condo Loans Work
Condo loans are unique because the buyer is not the legal owner of the entire structure of the building their condo unit is located in. A condo is only a single unit in a bigger shared occupancy agreement.
You also join a collective that shares responsibility for common areas of the condo project, the roof, lawn areas, parking lots, and other shared spaces.
You will be required to sign and agree to condo association guidelines. Those guidelines may include restrictions on how residents may modify the exterior of their units, lawns, backyard where applicable, etc.
Condo owners may be required to pay a recurring fee for the maintenance of any shared spaces. Condo owners may also pay for common upkeep for areas such as a parking lot or the roof.
When these features need maintenance the charges are shared among the owners in the manner specified in condo owner’s association bylaws. Be sure to read them carefully.
What To Know When Planning A Condo Loan
Some sources report some lenders charge more interest for their condo loans than for other types of home loans. Whether or not this applies to your transaction will depend greatly on lender standards. But what about the FHA’s requirements?
The FHA condo loan program guidelines say the FHA interest rate requirement is no different than for other types of FHA loans.
When comparing lenders, be sure to ask if the institution offers a higher mortgage rate for condo loans than for their suburban equivalent.
Compare Lenders, Consider A Real Estate Agent
Remember that you have the option to review FHA condo approval lists, another important aspect of buying a condominium unit with an FHA mortgage.
You don’t want to assume your current lender or a single alternative has the best deal. It is far better to shop around for lenders the way you would for a used car dealership. Consider asking three to five to show you their rates, terms, and conditions.
Some may benefit from using a condo-focused real estate agent or one well-versed in condo transactions. A good agent knows where to look, may have information you can use to search exclusively for FHA-approved condo options, and can help you negotiate an unfamiliar housing market.
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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