Lauren Nowacki5-Minute Read
UPDATED: January 06, 2023
Buying a home with a conventional mortgage typically requires a hefty down payment and a credit score of at least 620. For first-time home buyers, those with little saved for a down payment or those with a lower credit score, there’s a popular alternative: the FHA loan.
The FHA loan is a mortgage that’s insured by the Federal Housing Administration (FHA). In some cases, it can be challenging to find a home that qualifies for an FHA loan, especially if that home is a condominium.
Condos must be FHA-approved, before you can secure this type of financing. FHA-approved simply means that the property met the set guidelines and passed the FHA approval process.
FHA-approved condos meet the property requirements of the U.S. Department of Housing and Urban Development (HUD) and can be purchased using an FHA loan.
Condominiums can be great properties for first-time home buyers, but the condo needs to meet FHA approval requirements in order for borrowers to qualify for an FHA loan. The following are qualifications for receiving an FHA mortgage:
Finding an FHA-approved condo isn’t always easy, but the HUD’s official listing is a good place to start. By inputting just a few pieces of information, you can see if the condo you wish to sell or purchase is approved or find a list of FHA-approved condos in a specific area.
You won’t need to fill in every box to get results, but there are two pieces of information required to get the data you seek.
First, you must input the state. Then, you must choose “Approved” in the status box if you only want to see FHA-approved condos. That’s all the information that’s required.
Note that the less information you provide, the more results you’ll get. This can be a good thing if you’re looking in multiple places. However, it can make your search more cumbersome if you have a specific area in mind.
Once you fill out all of the information, click “Send” to see a list of FHA-approved condos in the specified areas.
If the condo isn’t yet approved, the approval process can be pretty straightforward.
The first step in the approval process for getting a condo or complex FHA-approved and able to accept FHA mortgages requires the completion of the HUD Review and Approval Process (HRAP) or a Direct Endorsement Lender Review and Approval Process (DELRAP).
After the paperwork, a condo must then go through an FHA appraisal to confirm it’s up to FHA standards and meets all requirements.
The approval process can vary depending on a few factors, including the following:
Typically, approval takes about 2 – 4 weeks. Once the condo is FHA-approved, it must undergo recertification every 3 years.
To get approval, a condo development must meet the following FHA requirements:
Even if your condo complex doesn’t have approval, you may still be able to get your individual condo approved.
Under new HUD rules, an individual condo unit can be FHA-approved even if the rest of the development isn’t. This Single-Unit Approval is sometimes referred to as a “spot approval.” The allowance originally ended in 2010, but the FHA brought the process back in 2019.
These “spot approvals” are decided on a case-by-case basis and still require an FHA appraisal. You must work with an FHA-approved lender, and this lender must work with the complex’s management in filing the proper paperwork to gain approval.
Keep in mind that while the complex doesn’t need to have FHA approval, the complex still needs to meet FHA standards for your individual unit to get Single-Unit Approval.
The requirements for spot approval include:
If you’re selling your condo, you might wonder if yours is FHA-approved. Here are the types of condo projects that are FHA-eligible:
While these properties are eligible, it doesn’t mean they’re approved. To know if your specific development or unit is FHA-approved, consult your complex’s developers or a real estate agent. Of course, one of the fastest, easiest ways to see if you have an FHA-approved condo is to check out the U.S. Department of Housing and Urban Development (HUD)’s official list online.
If your condo isn’t FHA-approved, you can’t buy it with an FHA loan or sell it to a buyer with an FHA loan. You may be able to get your complex approved or receive a spot approval for your individual unit. However, in both instances, the complex must meet FHA standards.
This is important to keep in mind when selling or buying a home or condo – especially when you’re a first-time home buyer. Connect with one of our Home Loan Experts to help you better understand FHA loans, the FHA approval process and how to navigate the real estate market as a first-time home buyer.
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