A borrower can obtain Federal Housing Administration (FHA) loans to finance the purchase of a condominium as long as the condo is on the list of FHA-approved condominium projects. Families and individuals with lower incomes have higher chances of obtaining FHA loans since the U.S. government provides insurance and reimburses a lender in case a borrower cannot meet his mortgage obligations.
FHA Loan Program
The FHA loan program was established in 1933 to assist low-income families in obtaining mortgages. Because many financial institutions typically have strict qualifying criteria for income and assets, many low-income families are unable to obtain mortgages. Banks are more willing to qualify low-income families for FHA loans since they are insured by the U.S. government. FHA loans typically have down payments as low as 3.5% of the house price and low closing costs, and are available for one- to four-unit properties. FHA loans also require borrowers to participate in a mortgage insurance premium program administered by the U.S. Department of Housing and Urban Development (HUD).
FHA Loans for Condos
FHA loans are typically available for both single-family and multifamily homes. However, individuals can purchase condos using FHA loans if a particular condo project is approved by HUD. The department maintains a database, which allows users to search for FHA-approved condominium buildings by location, name or status. The search results for the FHA-approved condos show the address for the condo complex, type of approval method, percentage of units with active FHA-insured loans and the approval status of a condominium.