FHA insurance or Federal House Administration insurance, is a type of federal assistance and allows lower income Americans to make a loan for purchasing their awaited homes. In order to obtain the required mortgage insurance, an amount of one percent of the house value is required to close the deal.
Condominium buyers must obey the new lending rules. This has forced many developers to scrap new projects. They fear that many buyers will not be able to pay for their condos. The FHA has put a limit on the number of buyers who are qualified for loans. There are also restrictions on apartments where there are many tenants and homeowners who have defaulted.
Strict lending standards were designed to protect the financial health of the FHA. It is noted that about 18 percent of loans are delinquent or in foreclosure. When reserve FHA funds dipped below the minimum level required by the FHA, the results came as a blow to condo buyers since the FHA is a main source of funding.
FHA loans for condominiums share the exact terms as those that are given out for a single family home. Depending on the location of the project, limits and rates will change. You can also refinance with an FHA loan provided all the criteria are met. You will be required to pay insurance while the loan still exists.
To obtain an FHA loan, you actually need to contact some lenders that are FHA-approved by the U.S. Department of Housing and Urban Development or HUD. FHA condo loans can be more difficult than other types of purchases. But don’t be discouraged to explore their loan options; just be careful and aware of the rules to save your time and, especially, your money.
To be included in the “approved” list, the condominium must have been stated and exists in total condescension with the jurisdiction’s requirements in which the project is located and with all other suitable regulations and laws.
The FHA rules are:
1. The condominium project must comply with all applicable local and state statute and laws;
2. The project must contain at least two units and be insured appropriately;
3. It also must be essentially residential in nature, containing at least twenty-five percent of commercial space;
4. No more than ten percent of the units may be shareholders, and at least fifty percent of the units must be owner-occupied. It means that if too many units are rented, FHA will disapprove the loan;
5. At least fifty percent of the project must be sold prior to the issuance of the first FHA loan. Fifty percent must be occupied by their owners or sold to buyers who desire to occupy it. This rule exists, probably because owners take more care of their units and are fully invested in the complex.
Certain projects are not eligible for FHA loans, even if they have the demand to be acceptable. The preference of the FHA loan program is to provide resources for residential projects. As a result, condominium projects that are ineligible include condo hotels, timeshares, home projects and building condo units.
If a project is not on the list of approved condos, the lender can go through detailed eligibility requirements and issue an approval in place for the project. This way they can continue processing a loan to the buyer.