Financing a Condo
I’m in the process of negotiating a deal for the purchase of a condominium in Dallas. I thought I’d share a very important detail that a buyer should consider before purchasing a condo.
One can get an FHA loan for a property that is less than $250,000. One of the advantages of FHA loans versus conventional loans is that it’s insured by the federal government and also requires a minimal down payment (usually 3.5% down).
When it comes to financing a condo with an FHA loan, however, one thing that you must verify is that the condo building is warranted. If it’s not a warranted building, FHA won’t finance it.
“Why?” and “What is a warranted building?” you ask!!! A warranted building is a building that is primarily occupied by condominium owners. In the eyes of the FHA, its less risky to insure loans for condo buildings that are mainly owner occupied. If many units are leased to tenants or are not owner-occupied, then the building may be considered unwarranted.
With that said, whether you’re financing through FHA or a conventional loan, it is a good idea to consider whether a building is warranted. If you decide to sell in the future and the building is not warranted, you severly limit the amount of buyers that are eligible for financing a condo.
The following links provide valuable information regaring FHA requirements when it comes to condominiums: