Source: Realty Biz News —
A condo might be perfect if you don’t want to buy a single-family home. Though, if you want to use an FHA loan, you might find it more difficult as condos need to be approved.
There are many things to know about buying a condo, and this is one of them. We will take an in-depth look at the FHA condo approval process and the importance of doing so.
What are FHA Approved Condos?
Many people do not know that FHA has condo approval requirements. The Department of Housing and Urban Development (HUD) administers aid to local agencies to assist low-income residents.
The Federal Housing Administration (FHA) is part of the HUD and backs home loans through approved lenders.
After being appraised, condo developments or individual condos can be approved for FHA loans. When this happens, they will be given a condo ID number and added to the FHA approval list.
Before 2019, only the entire condo development could go through the approval process, but since then, individual condos can be approved by themselves.
Why Does the FHA Need Condos to be Approved?
The FHA is insuring loans for borrowers to buy condos, and they want to ensure the property will hold its value.
Since the FHA allows down payments of 3.5% and lower credit score requirements, there is more risk. For this reason, they also require recertification appraisals after 3 years.
How Do Condos Get FHA Approved?
If the FHA doesn’t approve the condo complex, a borrower can start the process for the condo they want to buy. Approving condos is more difficult than approving an FHA loan on an individual house.
The condo association’s finances are evaluated since they can contribute to the value of the individual condos.
For approval from the FHA, borrowers and the condo association need to complete paperwork. When communities do not already have approval, it is often because the developers didn’t consider it worth their time to complete this paperwork.
;
