FHA Spot Loans

FHA Spot Loans on Non-HUD-Approved Condos

Gustan Cho Associates are mortgage brokers licensed in 48 states

FHA spot loans are back. Condo buyers can now qualify for a condominium unit in a non-HUD-approved condo complex with an FHA loan. Many HUD-approved condo complexes are not renewing their annual HUD certification. This is due to the time it takes and the expensive annual costs. HUD used to have FHA spot loans.

FHA spot loans were discontinued until recently. Condo buyers either needed to go with conventional loans or non-QM loans to purchase a non-HUD approved condominium complex.

We will cover FHA spot loans on non-HUD-approved condominium complexes.  The team at Gustan Cho Associates offers to finance non-warrantable and condotel financing. We also have dozens of non-QM wholesale lending partners. In the following paragraphs, we will cover FHA spot loans and how you can qualify for an FHA loan on a non-HUD-approved condominium complex.

Buying a Condo Unit With an FHA Loan

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However, HUD has discontinued FHA Spot Loans for several years until now. Today, FHA spot loans are back. Condos are becoming increasingly popular among first-time homebuyers, millennials, busy professionals, students, and seniors. There are expensive monthly association dues. However, condominium owners do not have to worry about paying for maintenance, landscaping, snow plowing, and other services. The association fees take care of most maintenance costs.

What Are FHA Spot Loans

FHA spot loans on condominiums refer to financing provided by the Federal Housing Administration (FHA) for purchasing individual units within condominium complexes. In traditional FHA condominium financing, the entire condominium complex must be FHA-approved for buyers to obtain FHA-insured loans. However, spot loans allow buyers to obtain FHA financing for individual units within a condominium complex that might not be fully FHA-approved.

FHA spot loans were historically a popular option for buyers interested in purchasing units in condominium complexes that were not fully FHA-approved but still met FHA guidelines.

As of 2009, the FHA significantly restricted the use of spot loans due to concerns about the financial stability of condominium complexes and the risk associated with insuring individual units within complexes that may not meet FHA standards.
Under the current guidelines, the FHA generally requires that the entire condominium complex be FHA-approved for buyers to obtain FHA-insured loans. This requirement helps ensure the condominium complex meets certain financial stability, maintenance, and owner-occupancy standards.

How Can Buyers Purchase a Condominium in a Non-HUD Approved Condo Complex

FHA spot loans allow condominium buyers some exceptions and alternative financing options are available for buyers interested in purchasing units in condominium complexes that are not FHA-approved. Buyers and real estate professionals must stay updated on current FHA guidelines and regulations regarding condominium financing as they may evolve.

FHA Spot Loans Are Back

HUD, the parent of FHA, has condominium lending guidelines different from mortgage lending guidelines for regular single-family home purchase loans.  As time passes, it is becoming more difficult to purchase condominium units with FHA loans.  The reason is that more and more condominium complexes are not renewing their annual HUD certifications for the condo complex to be HUD-approved. The Federal Housing Administration allows borrowers to qualify for FHA loans for condominium purchases. However, the condominium complex needs to be FHA-approved.

Buying a Condo In a Non-Approved Condo Complex With an FHA Loan

Non-HUD-approved condo buildings are not approved for FHA condo loans. FHA spot loans were FHA loans that allowed condominium buyers to purchase condominiums in non-FHA-approved condominium complexes. The condominium mortgage was granted the flexibility to qualify for condominium loans on condo units within a complex not on HUD’s FHA-approved list of condominium complexes.

Using FHA Spot Loan To Purchase Condo in Non-HUD-Approved Condo Community

FHA spot loans are now available today with the changes to HUD condominium guidelines. In this article, we will discuss and cover FHA Spot Loans and HUD Condominium Guidelines on FHA loans.

Condominium Unit Homebuyers

There are so many new rules and regulations today that every mortgage loan officer can’t 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 borrower’s case scenario. In 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. Her mortgage contingency period was over, and she had a closing coming up in less than two weeks. My borrower has good credit, $40,000 in income as a school teacher, and $100,000 in student loans deferred for over a year. The condominium purchase price is $65,000. She does have a $500 car payment and minor credit card payments every month. Her credit scores are in the upper 600s.

Non-HUD Approved Condominiums

As mentioned earlier, it is getting more and more difficult to get an FHA loan on condominiums. This is because condominium complexes are not renewing their HUD certifications annually. The borrower was told by her first mortgage loan originator that she would have no problem getting a mortgage loan approved on a non-HUD-approved condominium unit with an FHA spot loan. The borrower got a pre-approval letter from her initial mortgage loan originator and submitted all her mortgage documents.

How Does FHA Spot Loans Work?

A few weeks later, I got a call from one of my realtor partners asking me if I could help her client get approved for a condominium loan. This client was promised approval from a mortgage loan originator via FHA spot loans. Here was the problem: FHA spot loans no longer existed and were eliminated years ago. The first mortgage loan originator was a veteran, reputable loan originator who had been in business for many years but did not realize that HUD had eliminated FHA spot loans. GREAT NEWS: FHA spot loans are now available. HUD Condo Guidelines have been updated so that condo complexes no longer have to be HUD-approved for buyers to purchase a condo unit.

FHA Spot Loans Now Available For Condominium Buyers

FHA Spot Loans Now Available For Condominium BuyersFHA spot loans were eliminated on February 1, 2010. It was no longer an option for borrowers for condominium purchases. However, the great news is that HUD changed the HUD Condo Guidelines and no longer requires condo complexes to be HUD-Approved. For those interested in purchasing a non-FHA-approved condominium unit, the condominium complex no longer needs to be HUD-approved.

HUD-Approved Certification on Condo Complexes

HUD-approved condominium projects needed to be re-certified every two years to remain on HUD’s approved list of condominium projects. A non-FHA-approved condominium complex can easily be on the approved list. However, the necessary inspections and fees need to be applied.

FHA Spot Loans For Non-HUD-Approved Condominiums

Effective October 2019, condo buyers can be eligible to purchase condos in non-HUD-approved condo complexes. Restrictions do apply. Gustan Cho Associates are experts in originating and closing FHA spot loans. Condo buyers can now purchase a condominium in a condominium complex that is not HUD-approved.

What Credit Score Is Needed To Purchase a Condominium Unit?

What is a good credit score to buy a condo? A credit of at least 580 and a 3.5% down payment — may qualify you for an FHA-insured condo mortgage. Condo homebuyers with credit scores lower than 580 are eligible for an FHA loan with a 10% down payment. You are eligible for an FHA loan with credit scores down to 500 FICO.
Per Fannie Mae and Freddie Mac agency guidelines, Conventional loans require a 620 credit score. VA loans do not have a minimum credit score requirement.
As long as you get approve/eligible per the automated underwriting system on VA loans, you do not need a specific credit score requirement. VA loans do not have a maximum cap on debt-to-income ratios. Condominium Home Buyers who need to qualify for FHA loans or other mortgage loans with a national mortgage company licensed in multiple states with no lender overlays on government and conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

Non-QM Expert Condo Mortgage Lender

One of our areas of expertise at Gustan Cho Associates is originating and closing non-QM loans. Our mortgage, one day out of foreclosure and bankruptcy, has zero waiting period requirements after bankruptcy or a housing event. Our bank statement mortgage for self-employed borrowers requires no income taxes and has no maximum loan limits.

Gustan Cho Associates offers stated-income mortgage programs like in the old days before the 2008 financial crisis on owner-occupant primary homes, second homes, and investment properties.

Retirees who have substantial assets but no traditional income source can qualify for a mortgage with our asset-depletion mortgage program. Gustan Cho Associates prides itself on having a national one-stop mortgage shop due to our government, conventional, non-QM, and alternative mortgage programs for residential home buyers and real estate investors on our investment loan programs.

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