FHA Condo financing now offers a more flexible condo approval option for home-buyers. In fact, home-buyer’s mortgaging a condo with FHA financing may bypass FHA condos needing to be listed as pre-approved if eligibility requirements are met. Instead, FHA allows for unit by unit Condo Approvals.
FHA Condo Spot Approvals – No Project Approval Required
In the old days (as in 1 day before this post), FHA condo financing had what were sometimes significant limits. Previously, condos were eligible for financing only when on FHA’s Approved Condo list. A condo not on this list was either ineligible for FHA financing OR the entire project the condo is in must pass a rigorous (and lengthy) FHA condo review process. As for the latter, it’s tough to buy a condo when you didn’t know if or when it would be eligible for an FHA loan.
Thankfully, FHA condo financing is now more accessible and in many cases much simpler. As of October 15, 2019 FHA allows “Spot Condo Approvals“. In other words, FHA now evaluates condos on a unit by unit basis. They no longer must depend on an entire Condo Project/HOA approval.
In fact, FHA’s spot condo approval process more closely mirrors the approval process used for Conventional financing. However, they are not identical processes.
FHA Spot Condo Unit Approval Requirements
FHA’s Spot Condo approval property requirements are reasonable. In short, mortgage lenders review a condo to determine whether they meet these standards. Those meeting all FHA Spot Condo approval standards are eligible for FHA financing. For example, some of the FHA spot condo rules include:
- No more than 15% of units delinquent on HOA dues
- At least 50% of units must be owner occupied (meaning primary or vacation home)
- In other words no more than 50% of units used as rentals allowed
- Project unit is 1 year old or older
- Project unit is in has at least 5 units total
In addition to FHA’s Spot Approval Condo process, the old way still exists. Condo’s listed on FHA’s Approved Condo list are still considered eligible for FHA financing. The big difference is that now FHA buyers have an additional option when considering the purchase of a condo in project not on FHA’s list.
FHA Financing for Condos
For many home-buyers FHA is an outstanding mortgage option. FHA offers flexible terms and requirements. For example,
- As little as 3.5% down payment
- Flexible credit requirements
- Competitive interest rate
- Allows for gift funds
- Allows for a co-signer (occupying and non-occupying)
By Jeremy House