What if you want to buy a home, but a house is out of your price range, or perhaps you just prefer the ease and convenience and not having to care for a lot of property. How about a condo? It is possible to get a Federal Housing Administration loan for a condominium. As far as the FHA is concerned, buying a condo (at least from the buyer’s perspective) is not much different from buying a standalone, single-family home. It just requires a special approval process.
Because of continued confusion over how FHA loans work with condos, along with changes made to the approval process in 2009, the FHA has clarified the “rules” on its website.
In order to seek FHA approval for a condominium loan, the buyer must:
1. The buyer must take out a loan with a term of up to 30 years.
2. The unit must be in a condo building that has at least two dwelling units.
3. The unit can be “detached or semi-detached, a rowhouse, a walk-up, or an elevator structure.” It cannot be a condominium hotel, a timeshare, a houseboat, or have more than one dwelling per condominium unit. And the project must be primarily residential.
4. The loan must be made by a bank, mortgage company, or other lending institution that is insured by the FHA.
Finding a Condo
However, you can’t just pick any condo. The FHA maintains a list of condominium projects that meet its lending criteria. (Just like with houses, the FHA has set FHA loan limits in Orange County for condo purchases. Since the program is insuring the loan, it limits its risk by setting these guidelines.)
To find FHA-approved condos, search the HUD.gov website for “condominiums” to find the page with drop-down menus and blank boxes where you can put in the name of the condo project you have your eye on, or just search by city or ZIP code. Your mortgage professional can also help you with this. In fact, even if a particular development is not on the list, some lenders have special authority to seek approval for a loan.
You may find that not all lenders are well-versed in setting up FHA loans for condos, especially in new developments and in cases where the borrower seeks to put less than 20 percent down. Make sure you choose a professional who is familiar with the unique condo approval process set out by the FHA.