Last month, we shared with you information about new FHA condo approval rules, which went into effect on October 15, 2019.
These rules allow for more condominiums to be approved for FHA mortgage loans, opening up the buyer pool to more people.
We’ve gathered some more information on how individual units can qualify for FHA approved loans, even if the entire complex isn’t approved.
Is my unit approved?
As a seller, or someone who will sell a condominium unit within the next few years, it’s helpful to know what your unit is eligible for. Since the FHA is one of the largest insurers of mortgages worldwide, being approved for this type of loan means that more potential buyers could qualify for financing.
You can determine if your condo is approved for an FHA insured loan two ways.
- Fill out this form on the U.S. Department of Housing and Urban Development (HUD) website. If your condo association is on the list, then all units within the development are approved for FHA financing, and you have no additional steps to complete.
- To determine if your individual unit can secure FHA approved financing, have the manager at your condo association complete a Condo/PUD Project Questionnaire. You can obtain a questionnaire from your mortgage lender. Your lender will then send out the paperwork to determine if your condo is eligible for these approvals. If so, you can market your unit as eligible for FHA financing.
Requirements for FHA Financing
For a condo unit to be approved for FHA financing, it must meet these main requirements:
- The unit cannot be classified as new construction.
- The project must have at least five units.
- If there are less than ten units in the project, no more than two units may be financed with FHA.
- If there are ten or more units in project, no more than 10% can be financed with FHA.
- The developer may not be in control of the HOA.
- No more than 15% of the total units can be in arrears.
- Projects CC&R’s must be recorded as required by state and local law.
- If there are more than 20 units, a single entity may not own more than 10% of units.
- If there are less than 20 units, no more than one unit can be owned by the same individual or related party.
- Commercial space cannot exceed 35% of total floor area.
- 50% of the units must be owner-occupied as primary residences. Secondary can be included in this if the owner doesn’t rent out the unit at all.
Interested in learning if your condo is approved for FHA financing? Contact us today!