January 30, 2012
FHA loan rules for home purchases are different than the rules for FHA insured loans for condominium units.
Since there are unique requirements for condo loans–including a requirement that condos to be considered for FHA mortgages be on an FHA-approved list–the FHA has published a set of guidelines for condo mortgages.
One reader wrote in to ask, “Is there a list of the FHA requirements that a condo project needs to comply with in order to be listed on the FHA approved list? Where can it be obtained? Thanks.”
The list of FHA requirements for a condo to be approved and listed can be downloaded at:
www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-19ml.doc
What do these guidelines cover? According to the FHA, condo projects must consist of two units or more, and be covered by hazard and liability insurance. Where appropriate flood insurance must also be present.
The FHA rules do not permit condo association bylaws to contain the “right of first refusal” clause when such a clauses is designed in such a way that it violates the Fair Housing Act.
No more than 25% of a condo project’s total floor space can be used for commercial purposes and still be approved for an FHA mortgage.
Additionally, FHA rules state, “No more than 10 percent of the units may be owned by one investor.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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