Do you love the concept of living in an apartment building where you’re close to neighbors, have community resources, and maintenance taken care of for you? Do you also love the concept of owning a property and being done paying for it after a time period of 15 to 30 years?
Federal home loans are well sought after by Americans looking to own property. These mortgages offer low-interest and down payments as low as zero. The best part is that whether you want to live in the city, in the suburbs or in the country, you can use federal home loans to finance a condo!
VA CONDO RULES
If you are seeking out the VA home loan and getting a condo with it at zero dollars down, your primary task will be to seek out a VA approved condo. A good VA approved lender, such as VA Home Loan Centers, will be able to provide you with a list of properties already approved, or help you to see if the condo you wish to live in is eligible.
Certain items needed for approval from the VA of a condo will be a copy of the HOA budget, minutes from the past two HOA meetings, proof that common areas are managed by HOA, lender certification of met requirements of pre-sale, and an appraisal of how any commercial units in the complex affects the residents (example: if there is a three floor building with two floors of residents and street accessible businesses on first floor). For the time of closing, if the appraiser notes there is a potential termite problem, this is the only time a termite inspection is needed.
FHA CONDO RULES
Condos financed by an FHA home loan need to be approved by the Department of Housing and Urban Development (HUD). Condos that are under construction, will be built soon, over a year old, or converted from an old building may qualify.
One requirement is that the condo building must be three-fourths or more residential property use. For example, if the building is four floors with four units on each floor, then only a limit of 4 units out of the total 16 units may be business use. Typically, the businesses will be on the street level, especially in cities and towns.
The FHA home loan may also be used on manufactured condos, such as modular condos and townhomes. The building may not be a hotel or motel property, and most assisted living complexes will not qualify.
USDA CONDO RULES
USDA home loans may be used on condos, which is surprising to some, since they may be familiar that USDA home loans may only be used on modest, single family homes. There are lots of circumstances that will keep the condo you want from qualifying, but the first step towards checking if your condo will be approved is checking the address of it on the USDA home loan eligibility online verification tool.
You will need to obtain both homeowner’s insurance and flood insurance for a USDA home loan condo and the HOA fees will need to fit into your monthly Debt to Income ratio. Whether the condo unit is attached or detached from others will not have any bearing on if it will be approved.
If you need a condo ID, VA condo IDs do not expire, which is great news. FHA/HUD condo IDs will be active for two years, which is a relatively long period of time.
If you want a USDA condo ID, this is where it gets slightly complicated. You will need to obtain a condo ID from a property approved by either the VA, FHA/HUD, or Fannie Mae (under their Condo Project Manager tool). Again, if you use a lender like VA Home Loan Centers, or us here at FedHome Loan Centers, we can do this tedious ground work for you.
When obtaining a condo with any federal home loan, you must state intent to occupy the home within 60 days of closing. This is helpful to those moving from far away distances, for retirees or the elderly, and families with children finishing school.
With the VA home loan, the 60 day rule can be waived if the borrower is the active duty soldier being deployed. Then, the borrower may start occupying up until a year after closing, as long as his or her family is occupying the residence in their place.
The FHA will also have specific residual income rules with family size and who will be occupying the home. Generally, they consider a family size of five or lower to be reasonable.
For the USDA home loan, there are certain people who cannot permanently live in the home. If there is an incapacitated family member and they require round the clock care, then the caretaker or “resident assistant” may not occupy the home. Family members who stay home when the primary residents leave, such as the elderly or such disabled persons, may be subject to evaluation by the USDA. The USDA condo may not be used under AirBNB or other home sharing program, as the property would be generating income.
You may have exchange students as temporary residents in a USDA home loan property, but you may not be receiving any compensation for hosting them or claim them as dependents on your taxes. Foster children are acceptable, so long as they do not overwhelm a family’s resources and they may not be considered part of the client’s income or deductions.