FHA Approved Condos & Ownership Requirements

The Federal Housing Administration (FHA) condominium loan program allows condo buyers to use FHA loans as an alternative to conventional mortgages and refinances. But not every condominium qualifies for an FHA loan. If you're planning to use an FHA loan to buy a condominium unit, learn which condos qualify in your area before you start home shopping.

You can search for FHA-approved condominiums using the FHA's condominiums search tool. If a condominium you want is not on the list, it is still possible for the property to gain FHA approval and become eligible. The approval process takes 30 to 60 days.

Not every condominium is FHA approved. A condo's structure, location and association must meet FHA requirements to gain approval. Existing FHA-approved condominiums must renew their certification every two years.

FHA-compliant condominium associations must follow FHA rules. For example, FHA condominiums cannot have a high percentage of renters. The condominium building or development must be mostly used as residential real estate, and the condo must be a certain distance from known hazards.

If the condominium is not FHA approved, the condo association may be willing to go through the FHA-approval process. Gaining FHA approval would benefit condo owners by opening up the pool of potential buyers to a wider market. It would also give owners who want to refinance another loan option.

Some condo associations might refuse to apply for FHA approval because they don't find it a priority or want to avoid the costs associated with the approval process. Condo associations have to pay a fee to apply for FHA approval.

To be eligible for FHA condo certification, condominiums must be legally structured as actual condominiums and not as co-ops. The property must consist of two or more units.

The project must have sufficient insurance coverage for hazards and routine liabilities. Depending on the condo's setting, the FHA may require the homeowners association (HOA) to buy additional insurance.

The FHA requires FHA condominium HOAs to follow rigid guidelines designed to protect the civil rights and pocketbooks of buyers. Most FHA HOA rules focus on the financial viability of the HOA.

FHA-approved condominiums must limit the amount of space devoted to commercial enterprise. Also, the condo development must be safe from obvious hazards that might harm the property's value.

This summary is not an exhaustive list, and is meant to give you an idea of the basic requirements for FHA condominium approval. Find FHA-approved condos in your area on the FHA's Condominiums search tool.

Lenders include your monthly condo association dues when calculating the escrow amount that is added to your monthly loan payment. The HOA fees may have a big impact on how much you can afford. Before you get pre-qualified by a lender, research what the average cost of condo association dues are in your area of interest. It's also a good idea to research your property taxes.

A few hundred dollars per month could greatly affect how much you qualify for. Ask the lender what the FHA mortgage insurance premium monthly cost might be on your loan amount and factor this in as well. Check your payment using our mortgage calculator.

Eric Lowery is president of Insight Loans. An expert on the mortgage process, he offers the following insights on FHA condominium loans.

*This interview has been edited for clarity and length.