FHA APPROVED CONDOS

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FHA Condo Loans are specifically geared toward those who purchase housing units in a condominium building. Condominium ownership, in which separate owners of individual units jointly own the development’s common areas and facilities, is for some a very popular alternative to homeownership. An FHA Condo Loan is for financing a condo that meets FHA guidelines.

In today’s market, with rising home prices, condos are gaining more traction, due to the fact that condos usually are less expensive than single-family homes.

FHA approval requirements for condos

Before you begin the process of buying a FHA approved condo, it is important to know what condos need in order to qualify:

• The condo property or project must be completed. If a project is still in the process of being built, it won’t qualify.
• No more than 50 percent of units can be used as rentals or be investor-owned. This means you have to buy the unit and actually live in it.
• The property must be insured and the condo association must keep at least 10 percent of the HOA budget in a cash reserve.
• No more than 35 percent of the property can be for commercial use.

There are other restrictions, such as forbidding FHA loans for units in condotels (condos that have many hotel-like amenities and which rent units to vacationers) or for condos in undesirable areas, such as close to a landfill or airport.

What is the process of getting a condo FHA-approved?

Condos that are looking to accept buyers borrowing an FHA loan have to go through an approval process and get recertified every three years to remain eligible for FHA loans. Under the new rules, individual condo units can be eligible for FHA loans even if the full development isn’t FHA-approved. This type of single-unit approval is called spot approval.

The approval process varies depending on the original structure requesting approval. For instance, older buildings might have a longer approval process than new projects.

Condo developments looking to get approved need to complete the HUD Review and Approval Process (HRAP) or Direct Endorsement Lender Review and Approval Process (DELRAP) for lenders. Once a condo is approved through HRAP or DELRAP, it’ll receive a condo ID used for the project, as well as a submission number.