FHA Condo Approval Specialist: USDA Purchase Loans for Condo Units

USDA Purchase Loans for Condo Units

USDA Purchase Loans for Condo Units

usda condominiumProbably the most under-utilized purchase loans for condominium units are those insured by the USDA.  Like the VA and FHA, the USDA Rural Development (RD) program is a home loan insurance that allows the financing of condominium units.

One of the most important criterion for use of this program is that the loans are only available in areas in which the USDA deems to be “rural”.  A rural area is one in which the population is 35,000 or less.  The USDA does not go by towns, it uses census tracts which can allow use of the RD program in part of a town but not the rest.  To know if the condo unit is in an eligible census tract, you can follow this link and click on the Single Family Housing link under Property Eligibility on the left of the page.

The RD program also has maximum income limits for its use and is a computation based on the number of dependents, disabled persons and persons aged 62+ that are living in the household.  The calculation also takes into account the county of the property, annual child care expenses and all income earned by adults in the home (not just the borrowers’ incomes).  You can use the link above and click Single Family Housing under Income Eligibility and use the worksheet to determine eligibility.

Unlike FHA and the VA, the USDA does not maintain its own approved condominiums list.  For a condominium unit to be eligible for RD financing, the project must be on the approved condominiums list of FHA, the VA, Fannie Mae or Freddie Mac.

Where this becomes interesting (at least to me) is when dealing with new construction projects.  FHA, the VA and Fannie/Freddie have different pre-sale requirements for new projects and their calculation.  FHA has the lowest pre-sale only requiring that 30% of the units be sold or pending sale.  Fannie/Freddie have a 50% pre-sale requirement and the VA says that 70% of the total number of units must be sold.

Therefore, for new construction in rural areas, it would make good sense to get approved with FHA to allow the use of the RD program as well.  The USDA does not have a maximum RD loan concentration limit; FHA caps its loan concentration in new projects to 50%.  Thus, after 30% of the units are sold, 50% can be financed with FHA and the rest with the RD program.  This is very important for developers to know when constructing in rural areas.

For more information about USDA’s requirements for condominium projects, you can access the Administrative Notice released by the USDA in 2007.  [The form does need some updating with regards to the pre-sale requirement.  The percentages that are listed above are accurate as of 4/17/15.] 

Or you can contact Eric Boucher at AskEric@readysetloan.com

Top Photo Credit: (c) Can Stock Photo / kenhurst

The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA.  We have assisted nearly 200 condominiums and we can help your association.

 

ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.

 

Please contact us with any questions regarding FHA or VA condominium project approvals.  You can email me at askeric@readysetloan.com or call me at 404-433-4565. I will be happy to answer any of your questions.

 


FHA/VA Condo Approval Specialist

404-433-4565 Cell Phone

860-644-3772 Fax Phone

eric.boucher@readysetloan.com
ready set loan condo team

 

 CAI-CT logo

 Check out our article in Common Interest magazine on page 19!

Find Eric Boucher with ReadySetLoan Condo Team on Google+

Comment balloon 13 commentsReadySetLoan Condo Approval Team • April 17 2015 05:19AM

Comments

This will be my lesson for the day. I try to learn something new each day.  I was aware that they had to be approved but your explanation was far more than I knew.  Thanks for the post.

Posted by Rose Mary Justice, Synergy Realty Pros (Synergy Realty Pros) about 3 years ago

Thanks Eric.   This is surprising to me simply because few rural areas will have zoning for condos.

Good to know.

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) about 3 years ago

Eric Boucher  Now if only project managers would take the time to read and understand .......

Posted by Hannah Williams, Expertise NE Philadelphia & Bucks 215-953-8818 (Re/Max Eastern inc.) about 3 years ago

Thank you Rose Mary.  I'm glad the article was of value to you!

Lenn Harley - we have lots of condos in rural areas up here in the Northeast.  Maybe things are different in your area...?

Hannah Williams - from your lips to their ears...

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 3 years ago

Hi Eric, Does a PUD count as a condo for the USDA program?

Bill Roberts

Posted by Bill Roberts, "Baby Boomer" Retirement Planner (Brooks and Dunphy Real Estate) about 3 years ago

ERic I can think of a few areas outside Phoenix Metro (but fairly close) that one can take advantage of a USDA loan program.  We've used USDA for single family homes but not on condos.  I'll have to see what possibilites are out there. Great informational post!

Posted by Anna Banana Kruchten CRB, CRS 602-380-4886, Arizona's Top Banana! (Phoenix Property Shoppe) about 3 years ago

Hi Bill Roberts - since PUDs are not required to be approved by FHA, I am unsure how the USDA treats them.  I just sent an email to my contact at the USDA to get your question answered.  Sit tight...

Thank you very much Anna Banana Kruchten - Phoenix Real Estate Broker !  Using the above link to the USDA site, you can easily locate areas outside of Phoenix that would qualify for RD financing.  Any area where USDA financing is available for SFR, it will also be available for condos.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 3 years ago

Eric, can I assume this loan program do not extend to second homes?

Posted by Mike Frazier, Northwest Tennessee Realtor (Carousel Realty of Dyer County) about 3 years ago

Hi Mike - the USDA RD loan is only available to owner-occupants.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 3 years ago

Bill Roberts - the USDA replied and said that PUDs are treated as single-family homes so no outside approval is necessary.

Posted by ReadySetLoan Condo Approval Team, The FHA/VA Condo Project Approval Specialists (ReadySetLoan Condo Team LLC) about 3 years ago

Eric, Thank you very much. As usual, you go way above and beyond to help.

Bill Roberts

Posted by Bill Roberts, "Baby Boomer" Retirement Planner (Brooks and Dunphy Real Estate) about 3 years ago

Eric, you are right there are not many USDA/Rural Condo Loans out there, in fact I can't remember the last time I did one.

Good job in presenting the information.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 3 years ago

I have done several USDA loans in the past.  They can be a great resource.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) about 3 years ago

Participate