WHAT is Spot Loan

A spot loan is a type of mortgage loan issued to a borrower to purchase a single unit in a multi-unit building, such as a condo complex. Some lenders must approve an entire building before they agree to approve a loan for a unit within that building. However, other lenders will make a spot loan after approving only the unit to be purchased, as long as the building meets certain broader requirements.


Spot loans are frequently associated with the FHA spot loan program. This program allows condo buyers to obtain an FHA-insured loan on an individual unit in multifamily apartment buildings. This program allows borrowers to get loans on condos when they might not otherwise have qualified.

FHA Spot Loans and the Modern Housing Market

The FHA spot loan program has floundered since the crash of the real estate market: as of 2018, just 7 percent of condo projects or buildings were certified by the FHA to receive spot loans. Both the Obama and Trump Administration Departments of Housing and Urban Development have discussed revising regulations to open a larger share of the nation’s multifamily housing complexes for FHA loans, a top priority in an age when much new housing construction comes in the form of such condominiums. The goal of such regulation revisions would be to lower the burden on condo associations for FHA certification. To become certified, the boards of directors for multifamily complexes must submit detailed information on areas such as financial reserves, insurance, budgets and numbers of renters.

Alternate Meaning of Spot Loan

Spot loans can also refer to unsecured personal or business loans that lenders issue to individuals or businesses for unforeseen expenses quickly, or on the spot. Lenders can approve these loans in as little as ten minutes. Because such spot loans are typically unsecured, meaning the lender isn’t given a specific claim on a borrower’s assets, borrowers will typically pay a higher interest rate on these loans. Instead of pledging collateral, borrowers qualify for loans based on their credit history and income.

You can apply for a spot loan online, over the phone or through your ATM. Borrowers must submit personal information like name, phone number, social security number, income and the intended purpose of the funds. The process for approving the loan and its disbursal is in many cases completely automated, and a borrower can receive the funds in a matter of hours or days.