I just want to clarify condos can be FHA or Fannie Mae or Freddie Mac approved. This means that if the project meets one or all of those government entities investor concentration guidelines, then a borrower can obtain a loan underwritten by one of them. Investor concentration is a ratio that compares the number of owners who are investors (not living in the condo/renters) vs. actual homeowners living in the property. Banks like when you have more homeowners to investors. It is an industry belief that homeowners will pay the mortgage and maintain their property better than a renter or someone who has no personal investment in the property.
An FHA loan is guaranteed by the Federal Housing Administration. The guidelines are set by HUD and the lender may have additional restrictions or requirements. In some cases, lenders can request an FHA spot approval from HUD. This is where the borrower/lender requests an exception from HUD/FHA to lend to a borrower in a non-FHA approved project. An individual FHA spot approval requires alot of footwork by the lender and condo association but can be done.
Otherwise, if the borrower qualifies for an FHA loan, then their minimum down payment requirement is 3.5% plus closing costs. Remember the Seller can contribute to the buyer's closing costs or they may be eligible for down payment assistance.
If the condo is not FHA approved then it may be Fannie Mae or Freddie Mac approved. They have different investor concentration requirements. Fannie and Freddie loans are also known as conventional loans. If the borrower is not putting down 20%, they will have to get private mortgage insurance. In addition, they must have a credit score of 720 and above.
You may have a project that is Fannie and Freddie approved but not FHA approved. You may also have a project that is not approved by any of those entities. In that case you can only purchase with cash, hard money (35% down) or owner financing.
With respect the HOA fees, I live in community with an HOA. While I cannot control costs, I am very active with the board to make sure that all increases are thoroughly reviewed and warranted. On the other hand, condo/townhome HOA's are suffering because of the foreclosure crisis. Your best bet is to do your homework. Once the fees go up or special assessments are tacked on, (unless it's for a roof or some repairs that are tangible), then chances are they will not be reduced or removed again are remote. So be careful, do your due diligence, if they have a history of adding special assessments and poor financial management, it's probably going to continue.
Best of Luck,
Down Payment Assistance Specialist/Loan Officer
Enterprise Mortgage Group
Winter Park, FL