If you’re curious if you can buy a condo using an FHA loan.
The answer is YES!
In this article you are going to find out how you can find out which condos are FHA approved. You will also find out how to get approved and learn the FHA requirements to see if you qualify.
RATE SEARCH: Pre-Qualify for FHA Approved Condos
What are FHA Approved Condos?
FHA approved condos are primarily residential condominiums that meet the property eligibility requirements and are eligible to be purchased using an FHA Loan. The FHA insures one unit condos in which you can get a 15 year or 30 year fixed-rate mortgage.
You can buy almost any condo using many different types of home loans, including conventional loans. The property must be FHA approved if you want to purchase a condo or town-home using an FHA loan. Several types of condo projects are HUD eligible.
Eligible condominium projects
- Contain at least 2 units
- Detached or semi-detached units
- manufactured housing
- Row house
- walk up, mid or high-rise
- With or without an elevator
How to Look up the FHA Approved Condominium List?
A real estate agent can help you locate condos and townhomes in your area that are FHA eligible. But you can search for FHA approved condos on the FHA website. You can search for a specific condominium or you can browse by zip code or city. For example here I just want to search for all approved condos in Los Angeles. Just type in the city and state and change the status to approved.
It returns a list of 55 condos that are HUD approved for FHA loans. You can go through and find ones you would like to visit.
To get more information on any condo just click on the links.
- Little to no maintenance and repairs
- Monthly condo fees are predictable
- 24 hour security for some condominiums
- On-site amenities, like a swimming pool and gym
- Entertainment and recreational activities
- More affordable than similar single family homes
- Repairs are done when the condominium can get two them. Not always quickly
- Assessment charges
- Amenities you may rarely use will add to your costs
- Less privacy and more noise than single family communities
- Condo Association Fees
- Smaller square footage
- Condo fees are usually quite high
- Limited parking
- Could be restrictions on pets
What is an FHA Loan?
An FHA loan is a loan that is insured by the Federal Housing Administration. Private lenders make the loan but the FHA insures the mortgage in the event the Loan is defaulted on. Because the FHA insures the loan against borrower default, lenders are more willing to loosen their guidelines.
FHA-insured mortgages are very popular because you only need a 580 credit score and a 3.5% down payment to be eligible. FHA loans are popular for people with poor credit.
FHA Mortgage Benefits
- 580 credit score requirement
- 3.5% downpayment
- Downpayment can be a gift
- Low interest rates
- Higher debt-to-income ratios allowed
FHA Loan Guidelines
Another great benefit of an FHA mortgage is that the downpayment can be a gift from a friend or family member. The downpayment must be documented, they will just want to make sure the downpayment was not a loan you received from a lender.
- Steady employment (employed by the same company for the past 2 years is best) Exceptions can be made in some instances.
- Must be able to prove income (W2’s, pay stubs, tax returns)
- Have a front end ratio DTI (debt to income) ratio of 31% or less. The estimated loan payment should not be more than 31% of the borrowers income.
- Back end DTI of 43% or less. The total of all your monthly obligations including the estimated mortgage loan payment cannot be more than 43% of the borrowers income.Get an FHA condo rate quote here
First-Time Homebuyer Programs
If you’re a first-time home buyer you may qualify for certain homebuyer programs, grants, and down-payment assistance programs. You can check the HUD website for information on first-time buyer programs in your state. Your local Government city and county may offer local assistance which will be located on their website.
VA Approved Condos
Borrowers who qualify for a VA Loan, can buy VA approved condos with no downpayment. The requirements for VA condos are similar to that of FHA condominium requirements. You can search the VA approved condo list on the Veterans Administration website.
FHA Condo Approval Process
To buy an condominium with an FHA loan, the condo must be approved by HUD. FHA financing is much easier to qualify for than a traditional mortgage because the guidelines are more flexible.
A downpayment of just 3.5% is required, much less than many conforming mortgages require. Which is between 5 and 20 percent. A standard FHA pre-approval letter is all you need.
Alternative options for financing condos
Conventional loans are loans that are not insured by the FHA. Most conventional loans are owned by Freddie Mac and Freddie Mae. They will require 5%-10% for a downpayment, and a 620 minimum credit score. You can get a conventional loan for condos as well, but they do need to be Fannie Mae approved condos.
Fannie Mae and Freddie Mac do have less strict guidelines Complete our simple form to speak to a lender about conventional loans.
You can check out Fannie Mae approved condos on the Fannie Mae website
FHA Condos are great for first-time homebuyers
Condos are priced below surrounding single-family homes. There is no maintenance, many condominium’s take care of all yard work for you. Because of this condos are popular among many first-time buyers. FHA-insured mortgages are the most used type of mortgage loan for new home purchases. First time homebuyers love FHA loans because of the low down payment and low credit score requirements.
FHA Credit Score Guidelines
Borrowers must have a minimum credit score of 500 to qualify with a 10 percent down payment. For borrowers with a credit score of 580 and above may qualify with a 3.5% downpayment.
Even though technically the minimum required credit score for FHA financing is 500, it is recommended you work on improving your credit score above 580 before applying.
There are several factors that go into getting final approval for a loan. The mortgage underwriter will look at your application as a whole. Certain things in your credit report may pose a bigger risk to the lender, making them deny the application.
Because each lender is different and just because one lender denies a loan, does not mean another lender will not approve it. Each FHA-approved lender sets their own requirements, so keep on trying until you find one who is willing to approve you.
Mortgage Insurance Premium (MIP)
In order for the FHA to insure the loan, borrowers need to pay mortgage insurance premium (MIP). This is an annual fee, just like paying car insurance. The MIP is the same whether you’re buying a condo or a single family home. FHA MIP was recently lowered significantly. If you put less than 10 percent as a downpayment your MIP will be 0.85 percent. If you put more than 10% downpayment then that number drops to 0.80 percent.
MIP, short for mortgage insurance premium, is a monthly fee borrowers pay to the Federal Housing Administration to insure the loan. The MIP charge will be dependent on the Loan-to-Value ratio of the mortgage when it is started. LTV is short for Loan-to-value, the LTV is the amount owed on a loan compared to the value of the property. For instance, a $200,000 home that has a remaining loan balance of $150,000 has a LTV of 75%.
- If the loan has less an LTV greater than 90% the MIP is 0.85 percent of the loan amount amount. If the loan has an LTV under 90% the MIP is 0.80 percent.
- LTV over 90 percent the borrower will be required to pay the MIP for the life of the loan.
- LTV less than 90 percent the FHA MIP will cancel after 11 years.
How to Get Your Condo Project FHA Approved
If you’re building a new condo complex then applying for FHA approval is a very important step. By getting an FHA approval on your condo project you’re opening up your project to many more homebuyers. In order to get a new condominium project you’ll need the following information.
- Mapped Location
- HUD Form 92250 for environmental review
- HUD Form 92010 Equal Opportunity Employment Certificate
- Location of the project
- A letter describing the number of units, facilities, and type of structure
If you would like a company to help you get your condo approved click here
The Lenders Network has the largest network of mortgage lenders that specialize in home loans for borrowers with all types of credit scores. We will match you will the best lender based on your specific situation.