If you are in the market to buy a condo and are going to be using FHA financing, be sure that you take the time to understand that not all condominiums can be purchased using FHA financing.  When builders are constructing the units, the builder must take extra steps to apply with HUD (Department of Housing and Urban Development) to ensure that FHA financing can be used to finance units in the future.  If the builder does not take this step, you are out of luck if your only option is an FHA loan.  Over the past several years, FHA loans were not used very often because better mortgage programs were made available through the conventional channels, so many builders did not see a need to take the time and expense to jump through the hoops.  Now that FHA loans have made a significant comeback and are the dominate financing programs at this current time, many condominiums may get passed by because of this.  This is bad for would-be buyers, and for sellers who lack the ability to market to the majority of the buyer pool.

Seller’s may have some options, but only if they work with their management association to take the required steps to get the complex approved through HUD.

If you are a buyer, you need to be aware that when I use the term condo in this reference, that am referring to homes that are apart of a condominium association.  There are multiple types of condos.  First, you have your traditional condominium complex, typically these units are on a single level, but the condo building itself may have multiple levels, similar to apartment complexes.  Secondly, many town-homes (units that have multiple stories within the same unit) have a condominium association that oversee the shared common areas.  Lastly, there are “single family condos”.  These are individual homes with no shared walls, but are usually found on small lots.  Builders like these because they typically sell for more money and they can build more homes on the same area of land than if they built “non-condo” single family homes due to local zoning requirements.

And don’t always think that your real estate agent understands this.  Many agents advertise that FHA financing is available on all of their listings, not realizing that condos aren’t always approved for FHA financing.  To make sure, go to the link: https://entp.hud.gov/idapp/html/condlook.cfm.  This system is a little difficult to use, but select the correct state and city, and see if your condominium complex comes up on this list.  If it does not, you are most likely out of luck.

There is rumor that this may be changing in the near future, but I wouldn’t sit around waiting, as anything that involves government policy changes takes time.

I hope that this is helpful.  Best of luck to you and your home search.