Many buyers in the Minneapolis St Paul, along with Duluth, Rochester, and throughout all of MN qualify for FHA financing. FHA is the government backed loan program that allows for just 3.5% down payment. With the changes in the mortgage industry, if you are buying a CONDO, there are extra step and rules you need to be aware of.
When buying a home, lenders approve the buyer, and approve the home. When buying a town home or condo, lenders also have to approve the Association.
Without bothering you with the details, the purpose of this post is to simply make you aware of the extra approval process, and to let you know this additional step can potentially cause a loan denial, but usually just involves a much longer loan approval process.
Everyone using FHA financing to buy a condo should check to see if the condo project is on the FHA-approved (HUD-approved) list. This is an absolute must-read for you! If you want an FHA loan, you can only buy in condo projects that are approved by HUD (the Department of Housing and Urban Development).
HUD has recently made available online a list of the condo projects that are already approved. Before I show you how to access the list, know two things:
(1) If a condo project is on the list, it must still be checked by your lender to make sure it still meets HUD’s requirements (for owner/occupancy ratios, etc.)
(2) If a condo project is not on the list, your lender needs to go through a long process to get it approved. This potentially could delay your closing, or even result in a loan denial if the condo project isn’t ultimately approved. At the least, you should check to see if the project is approved before making any offer on a condo, then ask questions as to why it is not approved.
Condo’s in unapproved projects typically are offered at below market prices because of the inability to get financing. Many of these units are only able to be bought with cash.
Here’s how you check FHA approved Condo list:
(1) Go to HUD’s website at this link: https://entp.hud.gov/idapp/html/condlook.cfm.
(2) Fill in the blanks as they pertain to your condo search, and click the ‘send’ button at the bottom of the screen.
Finally, understand with the additional burden on FHA condo financing, you need to make sure you are working with an NMLS Licensed Loan Officer who understand the additional complexities to make your purchase smooth and stress free.