What Are FHA Spot Loans?

The Federal Housing Adminstration has condominium lending guidelines that is different than mortgage lending guidelines for regular single family home purchase loans.  The Federal Housing Administration allows borrowers to qualify for FHA loans for condominium purchases, however, the condominium complex needs to be FHA approved.  Non FHA approved condo buildings are not approved for FHA condo loans.  FHA spot loans were FHA insured mortgage loans which allowed condominium buyers to purchase condominiums in non FHA approved condominium complexes.  The condominium mortgage were granted the flexibility to qualify condominium mortgage loans on condominium units within a condominium complex that was not on HUD’s FHA approved list of condominium complexes.  FHA Spot Loans are no longer available today.

Condominium Unit Buyers

There are many new rules and regulations today that it is impossible for every mortgage loan officer to know them all.  There are many veteran mortgage loan officers with 20 plus years of experience who may not realize the new laws and regulations when dealing with a mortgage loan borrower’s case scenario.  One recent case scenario:  A borrower was referred to me who had a purchase contract on a condominium unit that is in a non FHA approved condominium complex and her mortgage contingency period was over and she had a closing coming up in less two weeks.  My borrower has good credit and $40,000 income as a school teacher and $100,000 in student loans that has been deferred for over a year.  The condominium purchase price $65,000 .  She does have a $500 car payment and minor credit card payments every month.  Her credit scores are in the upper 600’s.

Non-FHA Approved Condominiums

The borrower was told by her first mortgage loan originator that she will have no problem getting approved on a non FHA approved condominium unit with a FHA Spot Loans.  The borrower got a pre-approval letter from her initial mortgage loan originator and submitted all her mortgage documents.  A few weeks later I get a call from one of my realtor partners asking me if I can help her client get approved for a condominium loan where she was promised an approval from a mortgage loan originator via FHA spot loans.   Problem:  FHA spot loans no longer exists and were eliminated years ago.  The first mortgage loan originator was a veteran reputable loan originator who have been in business for many years but did not realize that HUD has eliminated FHA spot loans.

FHA Spot Loans No Longer Available For Condominium Buyers

FHA Spot Loans were eliminated in February 1, 2010 and is no longer an option for FHA insured mortgage loan borrowers for condominium purchases.  For those who are interested in purchasing a non FHA approved condominium unit, the condominium complex needs to be FHA approved.  FHA approved condominium projects needs to be recertified every two years in order to remain on HUD’s approved list of condominium projects.  A non FHA approved condominium complex can easily be on FHA approved list, however, the necessary inspections and fees need to be applied.

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