Darin and Christina Cunningham | Re/Max Elite
278 Franklin Road Suite 190 | Brentwood, TN 37027
Office: 615.661.4400 | Fax: 615.661.4115
Christina: 615.394.4168 | Darin: 615.456.4086

What is an Approved Condo Project With FHA?

What is an Approved Condo Project With FHA?The short and sweet summary of FHA loans is that they are an excellent deal for buyers.  With low down payments and low interest rates only possible because of a helpful government subsidy in the form of insurance, FHA loans seem like the perfect solution for any property purchase.  While it’s absolutely true that FHA loans can be of great value to buyers, the loans have very specific rules and regulations that guide their use.

Buyers who are interested in using an FHA loan for an investment property are likely to find themselves with a few challenges or personal investments they will have to make in order to qualify for the loan.  As an example, in order to purchase a 2nd home under FHA rules, a buyer’s spouse may need to inhabit the home for the better part of a year.

Likewise, if a buyer wishes to finance a condo project utilizing an FHA mortgage plan, certain parameters will have to be met.  If a buyer can fulfill the requirements of the FHA loans, however, the result can be a profitable condo project that pays for itself and more.

In order for a buyer to be able to utilize an FHA loan to finance a condo purchase, the condo project must already be on the FHA list of approved condominium projects.  However, it is possible for an interested buyer to purchase an entire condo project and seek approval from the FHA to bring other investors into the property.

Strict guidelines and short lists

In order to utilize FHA loans for condo projects, a buyer should carefully weigh whether the undertaking is right for them.  The first consideration a buyer should think about is whether they’ll be able to profitably manage the commercial space limitation on FHA-backed condo projects.

FHA-approved condos must be no more than 50% commercial space, meaning that an owner must occupy at least half of the space as their primary residence.  In addition to this restriction, investors or other parties can only own limited percentages of the property per owner.  While this number varies from property-to-property and from year-to-year as FHA guidelines change, ownership percentages have been as low as 10% to an individual owner and as high as 50% to an individual owner (outside of the primary owner).

In addition, FHA approvals are considered uncommon not only because of the stringency of maintenance, ownership, and upkeep policies but also because of FHA internal limitations on the number of condo projects allowable in each neighborhood or city.  Those interested in establishing an approved condo project should be prepared for some waiting time before viable options appear.

Reasons to consider the wait

If a buyer is able and willing to wait for viable properties and to live on site, the benefits to undertaking an approved condo project are massive.  The low interest rate means that reaching breakeven is simple and profiting above that is very likely.  In addition, the low down payment opens the doors for many people who would otherwise be barred from this type of living situation and investment opportunity.  The result can be incredibly satisfying and financially enriching.

Contact Darin Cunningham about your real estate investment

Darin Cunningham is an industry pro who knows the Nashville area better than anyone.  His experience can help you navigate purchasing a property and can help you get set with an investment that will enrich your future.  Call Darin today at (615) 456-4086 to get started.

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