How to buy a condo with a FHA loan?
FHA (Federal Housing Administration) allows for the financing of condos under its various loan programs. The guidelines and requirements regarding FHA condo approval have changed since February 1st, 2010. Currently, a condo project must have an approval in place before you can seek financing from a FHA lender.
Recent Changes to FHA Approved Condos
Before the introduction of the recent changes, anyone buying a condo with an FHA loan had a few options. They could either consult the FHA’s list of approved condominium projects and buy an unit in one of those projects or if the project is not currently approved, seek a spot approval.
For the spot approval, all that was required was the completion of a simple questionnaire by the condo’s Homeowner’s Association. The required information for an FHA condo approval was basically designed to assess the overall financial health of the condo project. If the information was satisfactory, the borrower can proceed to buy a condo unit with a FHA loan without any issues.
Currently, the FHA condo spot approval process is no longer allowed. For individual condo units to be eligible for an FHA loan, the entire condo project is now being subject to a rigorous evaluation process.
Tips for Buyers
A buyer planning to purchase a condo will be better off sticking only to those projects that are listed on the FHA website. This allows you to swiftly proceed with the FHA loan approval process without any hold ups due to the project’s approval status.
For each FHA approved condo listing, you’ll be able to see the date on which the property was approved, when the approval will expire and the phases of the project that are currently approved.
If you particularly like a condo in a project that doesn’t have an FHA approval in place, you’ll need to work with your lender and the condominium HOA to initiate the FHA condo approval process prior to securing the necessary financing to purchase it.
FHA Condo Approval Options
There are few different ways by which an FHA approval for a condo can be obtained. The FHA lender handling your loan application can gather all the necessary paperwork and submit for the HUD review and approval process, also known as HRAP. Seeking an approval through channel is expected to take a minimum of 4 – 6 weeks. Lately, FHA has been making efforts to put a streamlined condo approval process in place.
If the FHA lender has Direct Endorsement (DE) authority, they can review the documentation and provide an instant approval. This process is referred to as Direct Endorsement Lender Review and Approval Process (DELRAP). This is a much quicker option than getting a condo FHA approved through the HRAP process.
Once a condo is FHA approved, the rest of the steps involved in the loan approval are similar to those involved for other residential properties.