As of February 1st, FHA has made some major changes to qualify FHA loan for a condo purchase. Prior to Feb 1st, to get FHA a loan a condo, the condo complex had to be on the FHA approved condo list, or if the condo was not on the FHA approved list you could apply for a FHA “spot” approval for a FHA loan on just that one unit. Now as of February 1st, if the condo is not already on the FHA approved list, you have to get the entire condo project approved. Also, every two years a condo will have to be RE-approved to stay on the FHA approved list.
There are basically two ways to get a condo on the FHA approved list and we can assist with both:
1. Have FHA itself approve the condo project
2. Work with a lender (such as us) to have the condo project approved for FHA loans
Getting the condo approved through FHA will take a minimum of 6 weeks and will require lot’s of documentation about the project. Working with a lender can speed up the process considerably.
For a condo project to be approved for FHA loans and get on the FHA condo approved list, the condo project has to meet a checklist of requirements. I won’t talk about the entire checklist here, but I will mention some of the major qualifications a condo will need to meet:
1. Owner Occupancy percentage requirements
51% or more of the units must have owners living in the unit as their primary residence. This is generally information the condo HOA keeps on record. Not meeting this occupancy requirement is the #1 reason condo’s fail to be FHA approved (and approved for conventional loans as well for that matter).
2. FHA loan concentration
Only 50% of the units in the project can have FHA loans on them. There some exceptions to get up to 100% FHA loan concentration.
3. Number of Units Owned by one owner
No one entity can owner more than 10% of the condo units in the project.
4. Percentage of Owners Late on HOA Dues
No more than 15% of the owners/units can be late on their HOA dues. This is also a big one that disqualifies many projects.
So those are the top four areas that have to meet FHA specifications for a condo to be FHA approved.
Here are some of the benefits of using FHA financing:
- FHA loan interest rates on the 30 year fixed loans are still ridiculously low!
- Maximum FHA loans in many parts of California go up to $729,750. So you can get FHA loan on a condo in places like San Francisco, Los Angeles, San Diego and Orange County with 3.5% down up to a $729,750 FHA max loan amount
- FHA loan credit score does not have to perfect, but it does help if your score is 620 or above
- FHA loan down payment is only 3.5% and that can be a gift from a relative
- FHA loan approval is a lot easier than conventional loan approval. You can have a lower credit score, higher back end debt-to-income ratio, and still get 30 years fixed rates as good as conventional loans!
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
Fannie Mae Homepath Conventional Loan vs FHA for California Home Buyers
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