How does a condominium become FHA approved?


Quick Answer

A condominium becomes FHA approved when it meets federal requirements concerning safe design, proper insurance levels and availability to potential buyers. FHA loans require relatively low down payments, have low interest rates and allow some flexibility in qualification.

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Full Answer

Most construction types of condominiums are eligible for FHA approval, whether they are proposed, under construction or existing structures, regardless of age. Buildings undergoing conversion to condominiums are also eligible for approval, according to the U.S. Department of Housing and Urban Development. However, the FHA does not approve condominiums that are primarily used for purposes other than residential; ones in which the units are rented on a short-term basis, even if the units are individually owned; or if the developer continues to own the common areas, such as a clubhouse or pool, even after the homeowner's association has assumed control.

FHA approval for a condominium project is not required, but it has three primary benefits, according to the FHA. First, the loan is assumable at the original interest rate. Second, FHA approval makes the property more marketable in that buyers may use FHA financing. Third, a condominium must be well managed and insured to meet FHA approval standards, creating a level of care and responsibility that typically translates into higher property values.

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