When working with Buyers, I’m frequently asked many questions regarding FHA approved properties and other FHA Guidelines. I prepared the following to answer the questions that I’m most frequently asked and to assist Buyers with their Home search.
The Federal Housing Administration (FHA) was created in 1934 and insures Loans that are made by private Lenders. Though utilized by Home Buyers since the 1930’s, FHA insured Loans have recently become very popular among Home Buyers, particularly First Time Home Buyers, Buyers with lower Credit Scores who might not be eligible for Conventional Loans, Buyers who have less money saved for down payment, Buyers who prefer to place a smaller down payment instead of a larger one, and Buyers who have less money available for Closing Costs (Buyers are allowed to receive up to 6% Closing Cost assistance).
FHA Insured Loans only require Buyers to pay 3.5% Down Payment (an amount equal to 3.5% of the purchase price of the property). While that’s certainly a benefit, it’s a distinct disadvantage to Buyers who are interested in purchasing Condos and sometimes Townhouses as well. Many future Buyers are excited when they receive their FHA Loan Pre-Approval and are later disappointed when they discover that they are limited to purchasing property only in Buildings that have applied for and received FHA Approval .
Most Condos in our area have not applied for, nor will they qualify for, FHA Approval. Click to search for FHA Approved Condos in Ft. Lauderdale and other areas of South Florida.
A second VERY IMPORTANT FACTOR that FHA Buyers need to be aware of is that if they’re planning to purchase a Condo or Townhouse, many Condo and Townhouse Communities now stipulate a minimum amount of down payment from Buyers (meaning they require that Buyers are those who are financing their purchase with a specified amount of downpayment). Many Associations started this requirement in attempts to obtain Buyers whom they feel are more financially stable and, thus, less likely to default on payment of their Association Dues and Mortgage. In many cases, the minimum amount of down payment is 10% and I’m aware of some that require as much as 30%. That being the case, FHA Buyers who are only financing with 3.5% downpayment are not able to purchase in such Communities or would be required to finance their purchase with the minimum amount of required downpayment. Associations will verify that you meet the Loan downpayment requirements by requesting and reviewing a copy of your Loan documentation.
Because of FHA Approval requirements, Single Family Homes and Townhouses are typically the best fit for the majority of FHA Buyers.
A third and equally important fact that FHA Buyers must be aware of is that property purchased with regular FHA Loans MUST meet certain requirements so far as condition. Examples of items that would exclude Homes from qualifying for purchase with a regular FHA Loan include missing Kitchen Appliances, missing Kitchen Cabinets, missing A/C Compressor (non-working A/C), broken Windows, Roof in need of extensive repair, etc. Such Homes are often of more interest to Investors instead of Buyers who would like to occupy the Home immediately without the necessity for extensive repair.
An FHA Loan known as the 203K Loan is available to Buyers who are interested in purchasing “Fixer Uppers” aka Handyman’s Special (this Loan is available only to Buyers who will occupy the Home as their primary Residence, NOT available to Investor purchasers).
If you’re starting your Property search, you can search and view Properties by using the Advanced Property search feature on my website (search by Building name, Address, City, Zip Code, Price Range, Google Map Search, Year Built, Square Feet, and other search criteria).