FHA approved condos
FHA approved condominiums meet the mortgage insurance guidelines of the Federal Housing Administration and are eligible for FHA mortgage financing. They generally feature a high concentration of owner-occupied units, a strong condo aociation balance sheet, and are free of litigation.
FHA mortgage rates for condos
FHA loans are an important part of today’s housing market — both for single-family homes and for condos.
For many US borrowers, FHA loans are the cheapest, most-acceible low-down payment home loan.
The FHA minimum credit score requirements are as low as 580 for a 96.5 percent loan, and 500 for a 90 percent loan.
In addition, FHA mortgage rates are typically about .25 percent lower than conventional (non-government) loans. However, their mortgage insurance requirement of 1.75 percent upfront and a monthly amount that varies according to your loan term pushes the actual cost higher.
When you compare FHA condo loans with other programs, include the mortgage insurance in your calculations.
How to get a condo “FHA approved”
In order to get a condo building “FHA-approved”, the FHA requires specific documentation which varies based on the condo building’s history.
Getting a condo “FHA-approved” can take as little as two weeks or more than three months.
Note that getting a condo FHA-approved is not the home buyer’s responsibility. Typically, the responsibility falls to the developer of the condo or an agent for the developer. For more established condo buildings, a condo aociation or management company submits the condo approval package.
FHA guidelines for condos specify that a certain percentage of the units be “owner occupied.” For that calculation, FHA considers vacation condos or units occupied by family members as owner-occupied. In fact, a condo is owner-occupied unle it is:
- Occupied by a tenant
- Vacant and listed “for rent”
- Vacant and listed “for sale”
- In escrow to a buyer who does not plan to live in the unit or use it as a second home.
- An application for environment review, using HUD Form 92250
- A document describing the type of condominium structure, number of proposed units, and common facilities
- A location map
- A preliminary site plan
- An Equal Opportunity Employment certificate, using HUD Form 92010
- An Affirmative Fair Housing Marketing Plan
- A letter from the state Historic Preservation Office stating that the project is “acceptable”
Requirements for proposed condo buildings which are not yet built
Condos which are not yet built or developed must provide more documentation to the FHA than established projects. This is because the building has no history. Developers may begin the FHA condo approval proce when they plan their construction.
To get an unfinished condo building FHA-approved, the developer must submit:
The FHA may request additional supporting documentation. That may include condominium legal filings, a proposed operating budget for the building, including reserves, and a proposed management plan.
Builders may have to certify that they constructed condo units in accordance with local building codes. They may also have to provide an architect’s certification of the construction of the building.
Lastly, condo developers should be prepared to provide the FHA with a survey showing the exact location of all on-site improvements plus existing utility easements; and, a one-year warranty against faulty materials or workmanship.
Requirements for buildings existing le than one year
For buildings under construction, and buildings which have been completed for le than one year, the approval proce is easier.
A key point with newly-built condos or condos under construction is that without at least a 10-year warranty, FHA only allows 90 percent loans, and buyers must put at least 10 percent down.