If you are looking to buy a place but do not want the maintenance of a house, then you might want to consider a condominium. FHA approved condos make it possible to buy a unit, or multiple units, in a condominium building. To get pre-approved to purchase a condo, contact one of our condo loan experts today!

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What is an FHA approved condo?

The Federal Housing Administration (FHA) is backed by a government entity which means that there are more restrictions in place when purchasing a home or condo compared to a conventional home loan. An FHA loan is a mortgage insured by the FHA and issued by an FHA-approved lender.

Therefore, an FHA approved condo is a condominium unit or community that has been approved and has met the conditions for an FHA loan.

Note: In the past the entire condominium community would have to be approved for an FHA loan which made buying a condominium with an FHA loan challenging. As of 2019, single condominium units can now be approved for an FHA loan, so it is a great idea to consider.

How do FHA approved condo loans work?

FHA approved condo loans encourage lenders to provide affordable mortgage credit to borrowers seeking non-conventional home loan products. FHA loans are more lenient in requirements than conventional loans. Therefore, FHA helps low-to-moderate income families, or those who do not meet conventional loan requirements, purchase homes by keeping the overhead costs down.

The Section 234(c) program insures a 30-year loan for a unit in a condominium building that contains at minimum, four units.

See how much you can afford.

Your approval amount will give you an estimate on how much house you can afford.

Restrictions for FHA Condo Approval

There are some restrictions for FHA condo loans. If you are considering this loan product for a condominium that is not already approved, then you can go through the approval process to get the condo FHA loan approved. Here are the FHA condo loan restrictions:

  • If the apartment is in a building that was converted from rental housing, then mortgage insurance may not be provided under Section 234(c) unless:
    • The conversion occurred more than one year prior to the application for insurance
    • The potential buyer or co-buyer was a tenant of that rental housing
    • The conversion of the property is sponsored by a tenant’s organization that represents most of the households in the project.

  • Eighty percent of FHA mortgages in the project must be made to owner-occupants.
  • The condominium must have construction fully completed.
  • If the community has 10+ units, then 50% max can be FHA-insured units.
  • If the community has less than 10 units, a max of 2 units can be FHA-insured.
  • A minimum of 50% of all units must be occupied.
  • Max 35% of the property can be used for commercial use.
  • Required to be recertified every 3 years to assure requirements are met.

Requirements for FHA Condo Approval

To qualify for an FHA approved condo you must meet these minimum requirements:

  • Credit score: 500 or higher (can be higher by lender discretion)
  • Down payment: Minimum down payment of 3.5% of the purchase price of the condominium
  • Debt-to-income ratio: DTI depends on lender policy and credit score and is based on other qualifying factors but can be as high as 57%
  • Mortgage insurance: Additional costs for mortgage insurance consist of a75% upfront premium and a 0.45 – 1.05% annual fee
  • Primary residence: Must be a primary residence

However, every situation is unique so you must work with a qualified lender to determine your accurate eligibility. Ready to get started now? Contact a Direct Mortgage Lender today!

Find out what your mortgage options are!

Get expert advice and find out what you qualify for when you submit your application online.

FHA 100% Financing

This program provides homebuyers with 100% financing without requiring a down payment. However, closing costs are still required. This is achieved through a combination of a 1st and 2nd mortgage. This DPA program can be used to obtain an FHA loan and the amount of the 2nd mortgage can be up to 3.5% of the sales price or the appraised value, whichever is less. The term for the 2nd mortgage is 10 years.

Eligibility

To qualify for the program, you need to have a minimum credit score of 620 and a maximum Debt-to-Income (DTI) ratio of 45%. You must complete a Homebuyer Education course. And the eligible properties for financing are defined by FHA guidelines based on the maximum HUD county limit. The program covers single-family homes, duplexes, manufactured homes, PUDs, townhouses, and condos.

How To Find Approved FHA Condos

To see what condos are either approved or requesting approval, use the HUD website. If the condo you like is not on the approved list but it meets the above criteria, consider requesting approval.

What is single-unit approval?

A single-unit approval is when a single condo unit is approved by the lender for an FHA loan. This is approved on a case-by-case basis and the criteria must be met by the community. Work with your lender to get a single unit approved.

Why is it harder to get an FHA condo loan?

A condominium project may not be FHA approved if they do not meet the restrictions and eligibility requirements. While FHA loans have more lenient borrower requirements, the condo property requirements are stricter. To read the full rundown, visit the FHA condominium rule page.

Prepare yourself now for your homebuying journey by reading our FREE Homebuyer Guide eBook. To learn more about condo loans.

FHA Approved Condo FAQ 

What makes FHA approved condos different? 

FHA approved condos adhere to specific standards set by the FHA, ensuring they meet eligibility requirements for FHA financing. 

Can I get an FHA loan for any condo? 

No, only condos meeting FHA criteria can qualify for FHA loans. It’s important to ensure the condo is on the FHA approved list before pursuing an FHA loan. 

Are FHA approved condos limited in availability? 

FHA approved condos vary in availability based on location and demand. Some areas might have a higher concentration of these properties than others. 

What should I consider before buying an FHA approved condo? 

Factors to consider include understanding the HOA rules, insurance and maintenance costs, eligibility criteria, and ensuring the property meets your needs. 

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