Many people think FHA loans are for first time home buyers only, but that is not the case. Anyone can apply for an FHA loan, as long as the property they are making an offer on is FHA-approved and as long as they do not have an FHA loan already within a 75-mile radius of the property. The FHA loan program allows Buyers to buy a property with a lower down payment, as low as 3.5%, instead of a higher down payment like 20%.
One drawback of FHA loans is that it will cause the mortgage payment to be slightly higher as there is an insurance premium added to the loan. Since the Federal Housing Administration (HUD) is insuring the loan, they charge a premium to the Buyer for the period until the Buyer had attained a 20% equity stake with monthly payments. However, the loans are less strict to receive for the Buyer applying, because the government is insuring the loan for the bank. FHA loan requirements are somewhat more lenient to get approved by the bank for the Buyer than a conventional loan.
Not all properties qualify for FHA financing, so Buyers much check with their lenders first before making an offer. Some reasons a condominium complex may not be approved by FHA are:
- number of renters in complex being over the allowed percentage, such as 25%
- number of delinquent Owners not paying monthly HOA dues being over the allowed amount
- HOA involved in litigation