FHA loans and condos?
I recently went house hunting and found the perfect place for me, then to find out the bad news, the condo I was looking at said they would not accept a buyer whose loan was FHA. I am a first time buyer and I do not have much money to put down, hence why I had gotten approved for the FHA loan. Is that a common practice, that being with condos not allowing buyers with that type of loan. Any suggestions then on how I could buy a condo without having a large down payment. Thank you so much.
- Expert8675309Lv 71 decade agoFavorite Answer
It doesn't have anything to do with how the loan is obtained, closing costs, etc.. FHA also dropped property restrictions such as hand railings, etc. when they dropped the VC Sheet off the appraisal two years ago.
The only condo's that FHA won't finance, is a condo-hotel, or a new condo project that is not 50% sold.
This is going to be an unpopular answer, but it's a form of discrimination that is 100% legal. You can discriminate on the TYPE of financing.
Some housing projects do the same thing by requiring large earnest money deposits...b/c only your higher income earners are going to be able to meet those requirements.
That is the REAL reason....FHA allows borrowers with substantially lower credit scores....that can affect the HOA's ability to collect monthly dues...if they only take people with higher credit scores then they increase their chances of always being able to collect the dues.Source(s): Many, many years as a Realtor and former mortgage underwriter/broker...and always followed by my 7 "thumbs down" Y!A stalkers.
- 1 decade ago
its not discrimination. And FHA doesnt require the seeler to pay costs. Simply put an FHA loan has a lot of property restrictions. Does the condo have railings for the stairs? Is the phase of that condo complex at least 90% owner occupied? Is the entire complex 90% owner occupied? Is it a hotel or an apartment conversion? Is any portion 10% or greater of the complex owned by a single entity. Is there currenly running water and electricity? All these are things that would disqualify it from an FHA loan. More than likely the condo owner knows that an FHA loan would not qualify and thats why they dont want to go through the process.
- pea_nut_26Lv 61 decade ago
FHA loans require the seller to pay certain costs... I would think with the market, that the sellers would not be so choosy, and I would not suggest making a higher offer either...
keep shopping, you will find the right deal!!