2020 HUD Condo Guidelines On FHA Home Loans
This ARTICLE On 2020 HUD Condo Guidelines On FHA Home Loans Was PUBLISHED On May 28th, 2020
2020 has been quite a year for the mortgage market up to this point.
- We are currently seeing turmoil in the industry due to the coronavirus
- We all hope this global problem goes away as quickly as possible
- In this blog, we will update our readers on how to utilize a mortgage backed by the U.S. Department of Housing and Urban Development to purchase a condo
- These guidelines are constantly changing and last year we saw some major improvements on the FHA side
- This blog will educate our readers on HUD backed mortgages and condominium guidelines
In this article, we will discuss and cover the 2020 HUD Condo Guidelines On FHA Home Loans.
The Newly UPDATED 2020 HUD Condo Guidelines
First, we must understand what a condominium means.
- A condominium or condo is defined as a living space similar to an apartment but is sellable as individual units, qualifying them as real estate
- A condominium building is divided into several units that are individually owned
- More often than not, the complex itself will have common areas that are jointly owned such as a dog park or parks for kids
- Condominiums are becoming more popular across major cities
- As we see millennials and generation Z enter into the mortgage market, a condo is a great property for this demographic
- Many retired couples and individuals love condos as well
- There is no outside maintenance required by the tenants
- You are only required to insure the walls in.
Let’s go over some more pros and cons for condominiums.
Benefits Of Condominium Ownership Versus Single-Family Homes
Advantages of buying a condo
- Usually more affordable compared to single-family dwellings
- Many times cheaper than renting!
- The majority of the maintenance is completed by the homeowner’s association
- Outdoor landscaping and snow removal are not your responsibility.
- Lower insurance costs due to your policy only cover the “walls in” policy
- Usually lower cost than a single-family home.
- Usually lower property taxes in a single-family home due not owning land
Many condominium complexes have on-site security making them a safe living option.
Disadvantages Of Condo Ownership
Disadvantages of buying a condo
- Loan level pricing adjustment – Usually there is a slightly higher interest rate when purchasing a condo compared to a single-family dwelling
- Homeowners association dues
- Not every homeowner’s association is doing business correctly
- We have heard horror stories
- Make sure you do your research on the association and management company.
- Added loan fees such as condo questionnaire
- Close living quarters
- A lack of privacy and limited parking can be a problem in some complexes
- Pets – depending on the complex, your loved ones may not be allowed
- Important to check on the rules regarding pets before you purchase a condo
- Lack of storage space, just like an apartment many condos do not have room to store all of your belongings
You may need to have a monthly living cost of a storage unit if you’re purchasing a condo.
Meeting 2020 HUD Condo Guidelines To Purchase A Condominium With An FHA Loan
A condo is an amazing property especially if built correctly.
- Condos are growing in many areas and provide lower-cost housing through thousands of Americans
- Buying a condo with an FHA loan needs to go down one of two routes
- The path of least resistance is when the complex is already approved through the FHA
- There is a database of approved condo complexes across the nation
- Please see this link to search properties in your area
- If you see your complex on THIS LIST, it means they have previously passed the FHA requirements
- If you do not see the condo complex on your list, it is still possible to use an FHA loan to buy this property
- You must complete a SINGLE UNIT APPROVAL (sometimes called spot approval)
- This process can be quite tedious and will cost you a little bit of money
- There are certain requirements that must be met
- Very important to understand that manual underwriting of a single approved condo requires a 10% down payment or greater
This is an FHA requirement that we do not see it changing anytime in the future
2020 HUD Condo Guidelines And Eligibility Requirements On FHA Loans
FHA Condo Basics:
- 580 scores and above require a 3.5% down payment
- Scores 500 – 579 require a 10% down payment
- Condo must pass FHA requirements
Buying a condo with a VA mortgage. This process is very similar to the FHA process if the property is already approved through the VA. If the condominium complex is not approved through the VA, there is not a single unit approval available at this time. In order to purchase a condo with a VA loan, the complex must be approved on THIS LIST.
Qualifying For An FHA Loan On A Condominium
If you were in the market to buy a condo, please do not let this blog scare you. We are experts in mortgage financing surrounding condominiums. For more information, please call Mike Gracz on 630-659-7644 or shoot an email to [email protected]. We are available seven days a week to answer your mortgage questions. Please check out our reviews and a YouTube CHANNEL to stay up to date with our mortgage team.