FHA Condo Approval
February 23, 2012
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FHA Condo Approval is really necessary? Even if real estate properties have become a little more affordable in the past years, the amount of money you will need to purchase and maintain these properties is still quite large, even if you opt to purchase a condo unit instead of a house and lot. While applying for mortgage loans is certainly possible, this is an option that’s not available to some individuals, especially with the high interest rates of some loans. Getting FHA condo approval is crucial if you want to avail of a loan that has a low interest rate to make purchasing a home much more affordable for you.
What is FHA condo approval?
Before looking into FHA condo approval, it’s important to understand what FHA loans are. The name FHA loans is actually a misnomer, since the Federal Housing Administration does not in fact loan money to people. Instead, it provides a way for prospective home buyers to apply for a loan, even those who would otherwise not qualify given their credit history and/or income. What’s more, these also have a lower interest rate and require smaller down payments compared to other kinds of loans, so these are more affordable to borrowers.
FHA condo approval can refer to either one of two things: the approval of a borrower to take out an FHA loan, or that a condo unit or building is part of the approval list of the FHA. FHA condo approval serves as insurance to lenders in case the borrower is not able to make the repayments as he or she promised. This makes the FHA loans attractive to lenders as well, as they have something to chase after in case the borrower goes into default.
Do you need to get FHA condo approval?
Getting FHA condo approval is necessary for borrowers if they want to get financial aid when they purchase a piece of property, or if they would otherwise have been disqualified from applying loans.
Condo complexes are actually not required to get FHA condo approval. However, getting the approval will raise the chances of units being sold in the market. Do note that even if a person was given FHA condo approval to take out the loan, he or she will not be able to use the funds to purchase a property that was not previously approved by the FHA. As such, by getting the approval, condo complex owners will effectively make their units available to these borrowers, thereby increasing the number of potential customer base who can purchase the property. Experts suggest that condos that are cheaper than $800,000 may need to get FHA condo approval; otherwise, they may end up missing 30% of the market. On the other hand, condos that are $1 million and up don’t really require the approval, although it will of course make the units more sellable.
FHA condo approval guidelines for borrowers
In order for a borrower to receive FHA condo approval, he or she will need to meet the following criteria:
• A healthy credit history. The borrower should have a good credit history and will need to have a good track record when it comes to debt repayment and bills payment in order to get FHA condo approval. Those who are approved of getting FHA loans are also individuals with a credit score of 620 or higher. It’s possible for those who have declared bankruptcy to apply for an FHA loan, provided that they apply for the loan two years after the declaration.
• Employment. The borrower should be employed in a company for two consecutive years and earns a steady income.
• Upfront cash. Borrowers will be required to pay a percentage of the sales price as down payment in FHA. The amount is usually set between 3.5 and 5%.
• Documents. Some of the documents you will need to submit in order to get FHA condo approval include your social security number, your tax returns, proof of legal residency, and/or valid identification.
How to get your condo on the FHA condo approval list
In the past, it’s possible for a single condo unit to receive FHA condo approval. However, rules have changed, and the whole complex will need to be approved for it to be included in the approval list. Some FHA condo approval requirements include:
• Condition of the condo. The condo complex should be free from any hazards or any other conditions that can put the health and safety of the occupants at risk in order to get FHA condo approval. The property is also checked for structural soundness.
• Aesthetics. Inspection will be conducted to check the aesthetics of the property, not in terms of decor, but of the condition of the unit. Some things that are looked into include broken windows, signs of pest infestation, and such.
• Number of units. The condo project should have at least two units.
• Insurance coverage. The project should have insurance coverage, particularly hazard coverage.
• Space. The complex should have no more than 25% of its floor space used for commercial purposes.
• Ownership. At least 50% of the properties in the complex should already be occupied by owners.
• Mortgage. At least 50% of the units should be sold prior to the endorsement of mortgages.
The property is personally inspected by an FHA-approved inspector as part of the FHA condo approval process. The condo complex owners will be able to find out whether their property receives approval within 30 days from the time of inspection.
What if the condo has already received FHA condo approval?
A condo that has already received FHA condo approval is much easier to purchase for borrowers who have already been approved by the FHA. All they will need to show is the FHA condo checklist, which is essentially a form that is used to check whether the complex still follows the requirements for approval from the time of its inspection to the present day.
Getting FHA condo approval can go a long way in helping prospective homeowners purchase their new homes and aiding condo owners to sell their units. If you’re looking to get the approval, do a bit of research to find out how to go about this to make the process much easier for you.
It’s necessary to get FHA Condo Approval
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