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 that 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
1. 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.
2. Lenient Qualification Criteria - FHA loans have more flexible qualification rules, such as lower FICO scores and smaller reserve requirements.
3. 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: 1. At least 50% of the units must be owner-occupied. This ensures that the residents have a vested interest in maintaining the property.
2. 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.
3. The condominium association must have appropriate insurance coverage.
4. The FHA also reviews any past-due association fees. This demonstrates the financial responsibility of the owners of the project.
5. 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.
Comments