What Does “FHA Approved Condo” mean?

If you’re looking to buy a condo, you may be wondering what FHA-approved means and whether or not it’s important for your purposes. (It is!) Whether or not a unit/building is FHA-approved will affect the type of housing loan you can qualify for. Recent changes in requirements by the U.S. Department of Housing and Urban Development have affected FHA approvals, especially regarding condos; now, the entire complex must be FHA-approved before the agency will agree to back a loan on any one unit.


FHA loans are often sought after by homebuyers because those who are qualified can purchase a home/condo for as little as 3.5% down, which is much lower than typical home loans will offer; conventional mortgage lenders usually require at least a 20% down payment, which isn’t feasible for many, especially first-time, homebuyers.

What this means for you as the buyer, is that the complex you choose to buy a condo in could very well determine your loan eligibility. If you move into a complex that isn’t FHA-approved, you can’t appeal to have your individual unit approved, and so you aren’t eligible for the 3.5% down perk. Putting less down on a property is ideal for many buyers because it means you may not have to spend money you don’t have.

Condo associations that aren’t FHA-approved typically have high delinquency rates, which disqualifies them for approval. Changes made by the U.S. Department of Housing and Urban Development have extended the ‘past due’ cut off for associations, so now, no more than 15% of the total units in a complex can be more than 60 days past due on assessment payments (versus 30 days past due before).

Such a modification to the requirements of the FHA-approval policy will allow more condo associations to qualify for FHA-approval, which means larger and better pickings for buyers looking for a condo. Additionally, another modification to the policy allows for mixed-use complexes (residential and commercial) to qualify for FHA-approval, provided they meet the other requirements. So if you find yourself looking at a complex with office/retail and residential space, don’t write it off because the association may actually be FHA-approved.

For any buyer who isn’t able or willing to put 20% down on a property, which is typically especially true for first time homebuyers, seeking a condo in an FHA-approved complex is the route to go. These properties are easier to finance because they meet requirements set forth by the U.S. Department of Housing and Urban Development, meaning these properties are typically in good condition and in good areas. Talk to your realtor and/or the condo association if you’re unsure of whether or not a complex is FHA-approved.

For more information on FHA-approved properties, check out this article from the Chicago Tribune or this one from the National Association of Realtors.


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