HUD Condo Guidelines For Condominium Home Buyers

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This BLOG On HUD Condo Guidelines For Condominium Home Buyers Was PUBLISHED On February 24th, 2019

Condominiums are becoming more and more popular among home buyers.

  • Millennials and seniors are gearing more towards condos versus single family purchases
  • The main reason why home buyers gravitate towards condominiums versus single family homes is due to maintenance, security, and potentially renting the unit at a later date
  • However, those who only qualify for FHA Loans need to meet HUD Condo Guidelines
  • Per HUD Condo Guidelines, only HUD Approved Condo Complexes are allowed on FHA Home Loans

More and more condo complex homeowners association are not renewing their HUD Certifications on their condo complex due to cost and red tape with having the complex meet HUD Condo Guidelines. In order to purchase a condo with an FHA Loan, the condo complex needs to be HUD Approve. There are no exceptions. FHA Spot Loans has been discontinued many years ago. FHA Spot Loans were an exception HUD made on non-HUD Approved condo complexes where buyers can get a waiver in purchasing a condo unit with FHA Loans.

Condominium Versus Single Family Home Lending Guidelines

It is more difficult to finance a condominium than a single family home.

  • Lenders consider condos riskier than single-family homes
  • The main reason is if the condo homeowners association mismanages the complex, it will affect the whole complex
  • In general, condos appreciate at a slower rate than single-family homes
  • Mortgage rates are higher than single-family homes
  • A condominium complex can become non-warrantable if the ownership is more than 51% in the condo complex
  • You cannot get government and/or conventional mortgages on non-warrantable condos
  • Gustan Cho Associates have special non-warrantable financing

However, a larger down payment is required and only adjustable rate mortgages are allowed with non-warrantable condo loans.

Reasons Why Condominiums Are Becoming Increasingly Popular

Millennials are entering the housing market.

  • Many millennials gravitate towards condos
  • The main reason is the condo homeowners association takes care of all maintenance
  • No need to mow the lawn and/or maintain the exterior and common areas
  • Millennials are willing to pay the monthly HOA Dues and have the HOA take care of snow plowing, vacuuming the common areas, and landscaping
  • If the roof leaks or parking lot needs repairs, the HOA will manage the task
  • Security is another concern
  • If owners need to take a vacation and/or are traveling for extended periods, burglars normally stay away from condo complexes where there is a lot of people

Many condo complexes have their own security team and video surveillance cameras throughout the premises.

HUD Condo Guidelines And Requirements On FHA Loans

HUD is the parent of FHA. FHA Loans is one of the most popular loan programs in the United States. Any borrowers qualified with FHA Loans can purchase single family homes, townhomes, or condominiums. However, if borrowers are purchasing a condo, the condo complex needs to meet HUD Condo Guidelines. Down payment on condos are the same as SFH and is 3.5%. Borrowers can qualify for 3.5% down payment FHA condo loan if they meet 580 credit scores. Borrowers with under 580 can qualify with 10% down payment. For a condo to be FHA approved, the condo complex needs to meet HUD Condo Guidelines.

Condo complexes that do not qualify are the following types of dwellings:

  • Condotels and Non-Warrantable Condominiums
  • Timeshares are not considered real estate so they do not qualify
  • Mixed use commercial/residential structures
  • Houseboats and/or manufactured/mobile housing structures

The condo search page allows lenders, potential buyers and realtors to check if the condo complex is FHA Approved. Gustan Cho Associates are experts in originating and funding condominium loans. Please contact us at 262-716-8151 or text us for faster response. Or email us at gcho@loancabin.com. If condo complex does not meet HUD Condo Guidelines, we have other alternative financing programs that may suit condo home buyers.

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