FHA approved condos can provide an excellent way to own a home without paying the high prices normally associated with such ownership. FHA condos are available primarily to low and moderate-income families. An FHA insured condo is not considered a true home by lenders. However, if you own your condo for at least three years, you will qualify for financing from the Federal Housing Administration. If you have a condo that you have owned for at least five years, you also may qualify for financing from this government-run program.
Typically, FHA insured condos are single family dwellings that meet all the housing qualification standards and are eligible for purchase using an FHA loan. The FHA guarantees one whole unit, usually with a fixed-rate mortgage, to one borrower. You can purchase any condo with several types of mortgage loans, including conventional ones. The amount you borrow with a FHA loan is limited to the amount of money the condo association currently has in its fund; most of these funds come from federal sources.
Most FHA condos require no down payment or minimum credit score requirements. Some associations require a minimal down payment and may also require that borrowers pay a co-borrower or other financial agent to act as a guarantee for the loan. In order to qualify for an FHA loan, borrowers must meet certain income and credit-related guidelines. In order to purchase an FHA insured condo, you must also have full equity in the home. Many homeowners choose to finance their condos through their own real estate agents.
Before purchasing any FHA approved condos, you should make sure that your lender is willing to support your project. It may be possible that your lender will not approve financing for your project because your credit may not be adequate for an FHA insured unit. You should discuss all options with a real estate agent who specializes in FHA and bank-sponsored condos. The primary advantage of financing through an FHA-insured loan is that your interest rate and mortgage payments are typically lower than conventional loans.
Most FHA-insured condos require no down payment, which makes them appealing to first-time buyers. If you are financing your condo through a traditional lender, you may be required to have a down payment, so it would be to your benefit to research your options. Most new condo buildings are constructed to require no down payment. With the lower cost of building insurance on new condos, many lenders and brokers offer financing with no down payment or minimum credit score requirements.
Not all FHA-insured projects are located in areas that support single-family residences. Projects that are located in areas where there is a high growth or condo conversion do require additional financing, in some cases. Some of these areas may have restrictions on which types of dwellings can be built, so you should familiarize yourself with the rules of your local condo association. If your application for a FHA loan is denied, don’t give up – you may be able to finance your single-family residence using a conventional loan. You should also contact your lender and find out what type of assistance they provide if your FHA application is rejected. If you decide to use a conventional loan, be sure to use an experienced real estate broker with experience working with single-family and FHA-insured properties.
One of the benefits of FHA-insured loans is that they generally require less documentation than conventional loans. This often means that your application for a FHA loan is approved more quickly. Once your application is approved, you will begin receiving notice of approval via mail. Your lender will provide you with the details of your new deed (or co-op agreement). You will then begin preparing for opening day, which can take several months depending on the size of your property and the popularity of the area where you live. After opening day, you and your investors will be required to register with the local county clerk before selling your condo – this is standard practice in all 50 states.
Most importantly, be sure to read your FHA approval documents carefully. There will typically be a disclosure page containing important information about the origin of your loan (loaner’s name, date of loan application, loan amount, interest rate, etc. ), the amount of time you will have to repay the loan, your new rate, and additional fees that may be charged by your association. Be sure to read this entire disclosure thoroughly before signing. If there is something that you don’t understand, don’t sign until you understand it – if you don’t understand your document, don’t sign it!