Are you looking to purchase a condo? But you’re just not sure, whether they are FHA approved? I am here to tell you that there are FHA approved condos out there in almost every state and city. In other words, just as you can take an FHA loan to buy a house, you’re perfectly able to take an FHA loan to finance a condo. The problems, however, are 1) where to find those FHA approved condos? And second, is the process the same as it is to buy a house.
Check out: 5 Signs You’re Not Ready To Buy A House
FHA loan definition
Before delving any further, what is an FHA loan? an FHA loan is a loan administered by the Federal House Administration, hence the name “FHA”. It is used mostly by people, especially first time home buyers, who do not have a lot of money for down payment, and who have a less than a desirable credit score.
For example, an FHA loan requires borrowers to have a minimum of 580 credit score and a down payment of 3.5% of the home purchase price.
FHA loan credit score requirement
These are actually the two main benefits of an FHA loan. So buying a $350,000 condo or a house, will only require you to come up with $12,250. Whereas a conventional loan will require you to put $70,000.
In order to get an FHA loan to buy a house, the mortgage lender needs to be FHA approved. However, to buy a condo, not only the lenders need to FHA approved, the building needs also to be FHA approved.
In other words, in order to buy a condo using an FHA loan, the property must be on the approved condos list.
Only the condo’s homeowner’s association, developer, property manager, or builder can apply to have the property added to the list of approved condos. Buyers or sellers’ submission will generally be rejected.
Where to find FHA approved condos?
FHA approved condos are available in almost any states or city, although the number is relatively small. However, the number of FHA approved condos varies depending on your state.
For example, in Alabama, there are only 24 FHA approved condos; Whereas in California, there are 2,073. As it states on the fha loan guide website, there are currently 9,620 FHA approved condos across the entire country.
One way to find one is to visit the U.S . Department of Housing and Urban Development website.
They have an FHA approved condos search tool, which allows you to search for FHA approved condos. All you have to do is to insert the information asked for in the pull-down menus. As it says on the website, you do not necessarily have to fill out all of the entry fields; the less information, the more results you get.
Find FHA approved condos on the FHALoans.guide website.
Visit the FHALoans.guide to find FHA approved condos in your state. Just as the HUD website, the FHALoans.guide has a powerful FHA approved condos search tool. All you have to do is fill out the form and find those available condos in your state or city.
FHA loan limits
FHA loan limits refers to the maximum amount of loan the FHA will give you. For 2019, for example, in low cost areas, FHA loan requirements have been set in place allowing the maximum amount for a single family home to be $314, 827. Whereas for a four-plex, the maximum amount is $605,525.
For high cost areas, the FHA loan limits for a single family home is $726, 525 and for a duplex, the FHA limit is $930, 300. Those limits, of course vary depending on your states and they are update annually. So visit your state to determine what the FHA mortgage lending limits are.
Requirements to be approved for an FHA loan:
The FHA loan requirements are fairly simple and straightforward. Here’s what they require: 1) You must have a credit score of at least 580.
2) A 3.5% down payment is required. (*note, if your FICO score is between 500 and 579, then you will have to put 10% down payment). 3) You will have to pay Private Mortgage Insurance (PMI);
4) Your debt to income ratio must be < 43%. Your debt to income ratio is the percentage of your income that you spend on debt, including mortgage, car loan, student debt, etc..
5) The home you intend to purchase must be your primary residence. You must also occupy the property within 60 days of closing.
It can’t be an investment property. However, you can buy a duplex or triplex, live in one unit and rent the other units. As long as you reside in the property, you will satisfy that requirement. Also, the house must meet FHA loan limits (see above).
6) Finally, and of course, you must have a steady income and proof of employment. I will discuss later whether a FHA loan is better than a conventional loan.
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