Fha Condominium Loan Requirements

NC FHA Condominium Loan Details

The FHA Program for Condominiums is a tiny bit different from the program that covers “traditional” Single Family Homes. Originally, the program was designed with differnt mortgage insurance coverage, that is no longer the case. The program, HUD Section 234(c) of the National Housing Act provides mortgage insurance for any mortgage loan covering a one-family unit in a project coupled with an undivided interest in the common areas and facilities which serve the project. All projects are included in the 234 (c), including dwelling units in detached, semidetached, row, garden-type, low- or high-rise structures. These types of properties are referred to as Condominiums.

HUD / FHA do not make loans, they insure them thruogh the mortgage insurance program. HUD will insure mortgagees against losses on mortgages used for buying a condo or to refinance individual units in eligible condominium projects provided that they meet certain guidelines.

A.	Project Eligibility. The condominium project must be on HUD’s approved condominium list.

B.	Applicant Eligibility. Eighty percent of the HUD-insured mortgages in a condominium project must be the principal residence of the owners (owner-occupants). This can be determined by calling the property management group.

C.	Maximum Insurable Mortgage: Same as the “regular single family” Section 203(b) (except that the mortgage amount must be in multiples of $50).

D.	Minimum Down Payment: Same as Section 203(b), which is 3.5 percent.

E.	Mortgage Term: Same as Section 203(b), which is 15, 20, 25 or 30 year terms.

F.	Mortgage Insurance Premium: Monthly fee of .55% PLUS Upfront MI of 2.25%

G.	Refinancing: Same as Section 203(b).

If the Condominium is not approved then the Lender may go through the “Spot Approval” process. For more information on this approval process, please click here.

If you are considering a Condominium in NC, please call Steve and Eleanor Thorne, Corporate Investors Mortgage Group, 919-649-5058

Condominium Loans and FHA Mortgage Changes

FHA announced new guidelines that will effect Condominiums beginning this fall. With their mortgagee letter, HUD (which governs the FHA Mortgage Loan program) changes the Spot Approval process, so that mortgage lender’s will be required to look at the overall “health” of the project.

You’ve read the news – massive numbers of people are behind on their mortgage payments. Guess what? Turns out massive numbers of people are ALSO behind on paying their Homeowner’s Dues! FHA currently allows the mortgage lender to receive MINIMAL information on the Condominium project if they are only making one loan in the project / building. Starting this fall, that will change and the lender will be required to approve a whole condo project.

The real question will be how long the approval process will take, and that could depend on what TYPE of mortgage “lender” you are doing business with. To obtain the condominium approval (beginning this fall) the Lender will have 2 options:

HUD Review and Approval Process (HRAP).
Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter. This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.

This applies to virtually all condominium projects – however, as you are considering an “established” (or existing, or “Used” condominium), there is an ongoing, constantly updated list of approved projects. Click here to find out if your condominium project is on the approved list!

Does this mean that FHA thinks purchasing a condominium is more risky? Yes. Condominium owners rely on those around them to keep the building in top shape, as opposed to a single family residence. However, this does not mean everyone should avoid condominiums, only that FHA/HUD will be looking at the over budgets, reserves, and liability insurance coverage to be certain that the project is “healthy” and a good investment!

If you are a FIRST TIME HOMEBUYER – remember that if you purchase and close prior to the end of November, 2009 – you might qualify for a $8000 check from the Government! Click here to learn more about the $8000 credit to First Time Homebuyers!

If you are considering purchasing a home in Cary, NC – or refinancing in Raleigh, NC, please contact Steve and Eleanor Thorne. Our office number is 919-649-5058 x 104.