In order to use FHA financing to buy a condo, the condominium project
must meet the eligibility requirements of the Federal Housing
Administration (FHA). FHA-insured loans offer some significant benefits for
the home buyer, such as lower down payment requirements and reduced
lender fees, and using this financing is a great way to purchase a condo.
The Federal Housing Administration establishes standards which must be
met in order to use FHA-insured loans. Once a Condominium project has
been assessed and approved, then home buyers can use this financial
product to buy their new home.
Benefits of Buying an FHA-Approved Condo
· Lower Down Payment – FHA loans offer the advantage of a lower
down payment compared to conventional loans. With a down payment as
low as 3.5%, first-time home buyers have a lower entry point to home
ownership.
· Lenient Qualification Criteria – FHA loans have more flexible
qualification rules, such as lower FICO scores and smaller reserve
requirements.
· Larger Home Market – By including condos in the pool of potential
homes, buyers have more choice in properties.
Criteria for FHA Approval
To gain FHA approval, there are some essential requirements that must be
met. Here are a few of the most important.
· At least 50% of the units must be owner-occupied. This ensures that
the residents have a vested interest in maintaining the property.
· The FHA reviews the financials of the association to ensure it is
economically stable. This includes minimum reserves and proper budgeting
for maintenance and repairs.
· The condominium association must have appropriate insurance
coverage.
· The FHA also reviews any past due association fees. This
demonstrates the financial responsibility of the owners in the project.
· FHA approval may also be denied if there is any pending litigation
that could affect the financial stability of the association.
An FHA-Approved condominium property allows potential home buyers
more choice when using FHA financing. For anyone interested in this
program, the first step is to work with a real estate professional or review
FHA-Approved properties online. FHA approval ensures that the buyer is
making a sound financial decision when buying their condo.
