Condo financing has a second layer most buyers do not expect: the project has to qualify too.
Why Does FHA Care About the Whole Condo Project?
When you buy a condo, you do not own the building in the same way you own a detached house.
The property includes:
- Your unit
- Shared structural/common elements
- HOA governance
- Association insurance
- Association finances
Problems at the association level can affect the value and risk of individual units.
What Can Affect FHA Condo Eligibility?
Depending on current FHA rules, issues can involve:
- Project approval
- Insurance
- Owner occupancy
- Commercial space
- Litigation
- Financial condition
- Delinquencies
- Structural concerns
Does the Entire Condo Complex Have to Be FHA Approved?
HUD has processes that can include project approval and, in qualifying circumstances, certain single-unit approval pathways.
Current requirements should always be checked because they change.
Why Buyers Should Check Before Falling in Love With a Condo
Suppose you are preapproved for FHA.
You find the perfect condo.
Then the lender discovers:
- Insurance problem
- Association litigation
- Project eligibility issue
Now the borrower may need:
- Different financing
- Different property
- Additional approval process
Check earlier when possible.
HOA Resale Package
The buyer should still review:
- HOA dues
- Special assessments
- Rules
- Reserves
- Insurance
- Rental restrictions
FHA approval does not mean the HOA is financially perfect or the community fits your lifestyle.
Condo Insurance
The association's master insurance can affect financing.
The buyer may also need an individual HO-6 policy.
Lisa's Take
A condo purchase has two layers:
Do you qualify?
and
Does the project qualify?
We want both answers early.
For the whole FHA library, visit the FHA Home Loans hub or the Financing a Home resource center.
