Condo Loan Rules You Need to Know Before You Apply
This surprises some buyers who might wrongly assume FHA home loans are need-based, require income restrictions or caps, etc. FHA home loans are not need-based and you cannot earn “too much” to qualify.
What should you know about the FHA Condominium Loan option? If you have not looked into your mortgage loan options in a while, you should re-investigate your options now, because rules governing FHA condo loans have changed.
At one time, a borrower could not get an FHA condo loan if the condominium project was not on or added to the list of FHA-approved projects.
That is no longer true in the same way; now, you may be allowed to buy a condo unit in a project that is NOT on the FHA’s list. If that is, the condo unit meets FHA guidelines.
When did the rules for FHA loan condo approval change? On August 15, 2019, FHA announced a “Condominium Project Approval Final Rule” published in the Federal Register. That resulted in a new set of guidelines for FHA loans where condo approvals are concerned.
Since those FHA loan rule modifications, the FHA has the authority “to ensure any mortgage covering a one-family unit in a project coupled with an undivided interest in the common areas and facilities which serve the project.”
You can use an FHA loan with a 15-year or 30-year loan term to buy or refinance, “a unit in an FHA-approved condominium project or in a project that is not FHA-approved but meets the Single-Unit Approval requirements” according to the HUD official site.
And how does a condo unit live up to Single-Unit Approval guidelines? “For project approval or recertification, eligible projects must be complete and exist in full compliance with applicable state law requirements including good standing with the state, and with all other applicable laws and regulations.
The project must also meet FHA approval requirements for Insurance coverage, the financial condition of the project, the physical condition of the property, and the “nature of the title”.
Eligibility rules for FHA Single-Unit Approval include (but may not be limited to) the following:
- Condo unit must be located in a project not already FHA-approved
- Condo unit must be finished and ready to occupy
- The condo must have at least five dwelling units
- The condo cannot be a manufactured home
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