FHA 234(c)

The Federal Housing Association 234(c) is a loan program that your IET Capital Loan Officer can help you take advantage of if you are purchasing or refinancing a condominium. The FHA 234(c) program was created to influence mortgage lenders to provide the same loans to you as they would to a borrower purchasing a single family home.

The Basics


The FHA 234(c) insurance program provides you with a great alternative to the traditional home buying choices on the market. If you are busy and do not wish to maintain a yard, traveling frequently or just enjoy the extra amenities of a condo unit, the FHA 234(c) can be very helpful when you begin the purchasing process. Although distinct from other FHA loans, the FHA 234(c) insurance program does share some common features with the basic FHA home loan.

  1. If you were to participate in the FHA 234(c) program you would probably receive a 30 year mortgage loan, like any other home buyer.
  2. The FHA 234(c) program would likely keep your initial down payment costs low.
  3. The FHA 234(c) program can often give lenders the extra confidence they need to provide you with a loan if you are in a lower income bracket.

Some Distinctions


Even though the FHA 234(c) program does appear to be rather similar to the traditional FHA home loan, you will notice some differences and particulars that apply to you as a condo buyer. The demands and qualifications for receiving FHA 234(c) loan insurance are not too overwhelming and your real estate agent should be able to walk you through all the steps, explaining the particulars along the way. Here are some things to keep in mind if you want to use the FHA 234(c) loan insurance program for your condo purchase:

  1. The FHA 234(c) is for the purchase of condo style homes only so yours must be either an attached or semi attached dwelling, a row house, a walkup, or a structure containing an elevator.
  2. If you are living in a building that was once a rental residence (like apartments) and is now a condo residence, the conversion must be at least one year old before you can take advantage of the FHA 234(c).
  3. Also if your condo is currently a rental type residence you can take advantage of the FHA 234(c) program if you and most of the other residents agree to turn your rental dwelling into a condo style dwelling.

Spot Approval


There is a small chance that you may want to purchase a condo that does not initially qualify for the FHA 234(c) and at this point you will need to go through a process called “Spot Approval”. Going through this process will probably require more time and effort but your IET real estate agent will be able to guide you through the process, answering any questions along the way, so you should not encounter anything too difficult. If you are initially rejected when you apply for the FHA 234(c) here are some requirements you and your real estate agent will have to fulfill.

  1. The condo you want to purchase should be completed and if part of a unit, the construction in the entire unit should also be completed with no plans for later additions.
  2. The other residents of the condo unit will need to have control and access to all the common areas in the condo.
  3. The majority of the condos in the unit where you want to purchase your condo should already be sold and at least half of them should be occupied.

Purchasing a condo is a great alternative to traditional home buying. The FHA 234(c) offers you the opportunity to receive the same kind of low cost financing as traditional home buyers, but through a program tailored to suit some of the special needs of condo buyers. As you go through this process, an IET real estate agent will be able to guide you and answer your questions, assuring that your condo buying experience is a pleasant and stress free process.

 

Check to see if complex FHA approved:

https://entp.hud.gov/idapp/html/condlook.cfm

(for conventional loans https://www.efanniemae.com/sf/refmaterials/approvedprojects/index.jsp?from=hp ) 

(for va loans https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch) 

Check for Fannie Mae approval

https://www.efanniemae.com/sf/refmaterials/approvedprojects/index.jsp?from=hp

HUD Underwriting Guidelines for Insuring Condos on the FHA Mortgage Program:

Home Mortgage Insurance Condominium Units (4265.1) 

 

Spot Approval Checklists

Checklist

HOA Questionairre

HUD Mortgagee Letter 96-41 re: instructions for condo spot approval

HUD Section 234(c) of the National Housing Act provides authority to insure any mortgage covering a one-family unit in a project coupled with an undivided interest in the common areas and facilities which serve the project. The project may include dwelling units in detached, semidetached, row, garden-type, low- or high-rise structures.  Generally these types of properties are referred to as Condominiums.

HUD insures mortgagees against losses on mortgage loans used for buying a condo or to refinance individual units in eligible condominium projects provided that they meet certain guidelines.

  • Project Eligibility. The condominium project must be on HUD's approved condominium list.
  • Applicant Eligibility. Eighty percent of the HUD-insured mortgages in a condominium project must be the principal residence of the owners (owner-occupants).
  • Maximum Insurable Mortgage: Same as Section 203(b) (except that the mortgage amount must be in multiples of $50).
  • Minimum Investment: Same as Section 203(b).
  • Mortgage Term: Same as Section 203(b).
  • Mortgage Insurance Premium: Monthly+Upfront MI of 1.75%
  • Refinancing: Same as Section 203(b).

If the Condominium is not approved then the Lender may go through the "Spot Approval" process.  The Spot Approval process is currently going through some changes, HUD is delegating authority to approve complexes at the Lender level.  Most lenders have not fully defined their policies for approving a condo comples so this process is currently working out some kinks.