Buy An FHA Approved Condo, Condominium or Townhouse Using An FHA Loan.

You will find that qualifying to purchase a condo or town home using an FHA loan is less expensive than a conventional mortgage because FHA guarantees the FHA lender against loss. FHA's section 203C to purchase a condo or townhouse provides financing for one family unit in a project coupled with an undivided interest in common areas that serve within the project. FHA approved condo or town home may include dwelling unites in detached, semidetached, row, low or high-rise type structures. Generally these types of properties are referred to as condominiums and can be financier with FHA mortgage insurance.

FHA Mortgages for Condominiums and Town homes

Most of the features of the FHA 234C condo loan is the same as those governing the basic FHA home loan program. For Example, The Down payment requirements minimal because FHA insures private FHA approved mortgage lenders against loss. This allows condominium buyers to finance more than any other mortgage program because FHA insures the private FHA condominium lender against loss. With an FHA condominium loan borrowers can expect to pay an up front mortgage insurance premium. And, a monthly mortgage premium is included in the monthly payment until the loan balance is less than 80% of the purchase price. The FHA 203c condominium loan terms extend up to 30 years to purchase a unit in a  condominium building. The condominium building which must contain at least four dwelling units and can be detached. FHA condominium loans are made by private FHA lending institutions and are insured by FHA’s Federal Housing Administration.

FHA Condominium Guidlines

HUD will insure FHA approved mortgage lenders against loss for condominium loans used to purchase or refinance individual condominiums within a  project provided that the FHA loan request fits within the FHA mortgage guidelines. Below are a list of basic guidelines for FHA loans on condos, town homes est.

1. Project Eligibility- The  condominium project must be approved for FHA financing check approved condominium list. More often then not they are approved contact the association to see if the condominium units are approved for FHA financing.
2. Applicant Eligibility- Eighty percent of the mortgages in a  condominium project must be the primary residence of the owners. FHA loans are for owner occupied properties only.
3. Maximum Insurable Mortgage- Same as traditional FHA 203b, except that the mortgage amount must be in multiples of $50.
4. Minimum Investment-  FHA loan applicants must have minimal FHA down payment. With FHA the down payment requirement can come from Friends, Family or Non profits.
5. FHA Mortgage Terms for Condominiums- 15,30, year terms.
6. FHA Mortgage Insurance Premiums- Monthly .55% +Upfront MI of 1.75% Financed into mortgage amount. These FHA mortgage insurance premiums are subject to change depending on market conditions. Even with these mortgage insurance premiums FHA still provides a better deal for mortgage applicants than conventional Condominium financing.
7. Refinancing- condominium refinancing  has the same terms at 203b traditional FHA mortgage refinance.

FHA Condominium Restrictions

FHA 234C condominium loans have some additional restrictions. If the apartment is in a building that was converted from rental housing, insurance is not permitted unless: (A) the conversion occurred more than one year before the application for insurance; (B) the potential buyer or co buyer was a tenant of that rental housing; or (C) the conversion of the property is sponsored by a tenant's organization that represents a majority of the households in the project and  80% of the condominium must be made to owner occupied.

FHA Condominium loan restrictions

If the apartment is in a building that was converted from rental housing, insurance may NOT be provided under FHA 234c UNLESS:

1. The Condo conversion must have occurred more than one year prior to the application for FHA mortgage insurance.
2. The potential buyer or co buyer was a tenant of that rental housing.
3. The conversion of the property is sponsored by a tenant's organization that represents a majority of the households in the project.

Eighty percent of FHA mortgages in the condominium must be made to owner occupants. ELIGIBILITY any creditworthy persons who meet FHA underwriting criteria and are intending to occupy the condominium unit as their principal residence are eligible to apply.

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