If you are a borrower who is looking to purchase a condominium you should know about a program for potential homeowners who want to purchase a home in a condominium development. This program is through the Mortgage Insurance for Condominium Units (Section 234(c)).
What Is The Mortgage Insurance For Condominium Units Program
If the condominium that the homeowner is wishing to purchase is going to be used as their primary residence and not property that will be used for income this program will be appropriate.
The United States Department of Housing and Urban Development (HUD) manages this program. It insures the loan that the borrowers have received to purchase the condominium property. Some borrowers will misunderstand and think that HUD is the group that issues the loan. This is not true. The HUD is responsible for insuring the loan that is given through a lender that is FHA approved.
For those who are renting their current condominium and have a low to medium amount of income this program is perfect when it comes to making the decision of purchasing the property they are living in.
Details Of This Program
When a borrower is interested in this program it is important for him/her to know a few important facts about an FHA insured loan. The program will insure a home loan up to thirty years. The condominium units can be a walk up units as well as a row house, semi-detached or an elevator structure. The building requirement is that the buildings must be separated into at least four dwellings. When it comes to the loan itself the loan must be given by a lender who is a certified HUD lender and you as the borrower must be able to prove your credit and meet the underwriting criteria that are set by HUD.
The financial requirements that are involved with a HUD loan are not as expensive as a traditional home loan. The down payment required may be as low as three percent or even less and finally the closing fees will be less than a traditional loan. This will allow loans for bad credit for borrowers who need it. This is because FHA limits the charges that lenders can charge on such items as the loan origination fees.
Loans That Will Not Be Allowed
As with all mortgage loans there are restrictions to the FHA loans. These restrictions apply to rental units that are being converted to ownership. When speaking of these any unit that has been converted to ownership over a year before the loan application will be rejected. Other potential rejections will be if a potential borrower or co borrower was a tenant of one of the units and if the tenant’s group that holds the majority of the households in that development sponsors property conversion.
As a borrower if you are interested in this type of loan you should do plenty of research that involves comparing rates and fees. You should also be sure to ask plenty of questions.