Buying a condo is a great way to invest in your own home while enjoying the benefits of low-maintenance living. When it comes to financing the purchase of a condominium, FHA loans are a popular choice. Take a look at the following guidelines for FHA condo loans and then make an appointment to speak with your lender to get current mortgage pricing.
What are FHA Condo Loans?
FHA Condominium Loans are special forms of home financing in which the property is a single unit within a larger complex or building. These loans are insured by the Federal Housing Administration (FHA) under FHA Section 234(c).
How does it work?
FHA Condominium Loans are designed to encourage lenders to offer affordable home financing to borrowers with non-conventional forms of homeownership. Because condos are often considered a higher financial risk, many lenders face the possibility of losing money on condo loans. With FHA backing, these lenders have some assurance that they will get most of their money back, in the event of default. For the borrower, this means more opportunity to purchase a condo without having to have exceptionally high credit scores or having to pay astronomical interest rates.
What are some of the restrictions?
If the unit is located in a building that was converted from rental housing, FHA insurance may not be provided for the property under Section 234(c) unless…
a.) the conversion was completed more than one year prior to the application for insurance
b.)the potential buyer(s) was a resident of the rental housing
c.) the conversion is sponsored by an organization that represents the majority of the tenants/households in the project.
Who is eligible?
In order to qualify for an FHA Condo Loan, applicants must be creditworthy (check with your lender for specific score criteria) and they must intend to use the condo unit as their primary residence.
Where can I find FHA-approved condos?
The U.S. Department of Housing and Urban Development offers a free web service where you can search for FHA-approved condominium projects by location, name, or status: https://entp.hud.gov/idapp/html/condolook.cfm
For more information on FHA condo loans and current rates, speak with an experienced mortgage lender at companies such as Wells Fargo, Chase, Bank of America, American Financial Resources or the other lenders and brokers featured on the rate tables on ForTheBestRate.com.
Please note that the information in the following post is subject to change without notice. We encourage you to speak with a licensed mortgage professional serving your area.