The condo checks every box. It's two bedrooms off Fletcher Parkway, it's priced in the low $400s, and the HOA covers water and trash. You're pre-approved, you write the offer, and then your lender calls with a question nobody asked you up front: is the complex FHA-approved?
A lot of them aren't.
FHA loans have a second approval layer for condos. The buyer has to qualify, and so does the whole building. HUD keeps a public list, and plenty of the older complexes around El Cajon and La Mesa have either never applied or let their approval lapse. Some HOAs don't bother because the paperwork is a hassle and nobody on the board is thinking about buyers. In those buildings an FHA buyer can still get through on a single-unit approval, but that process is slower, narrower, and it doesn't always come through.
I think lenders push first-time buyers toward FHA too quickly. The pitch is 3.5% down and easier credit, and for some people that really is the right call. If your score is under 660 or your debt-to-income is stretched, FHA may be the only door that's open, and I'd walk you through it gladly.
If your credit is decent, though, run the conventional numbers before you decide. Conventional loans go as low as 3% down. Private mortgage insurance on a conventional loan comes off once you reach 20% equity. FHA mortgage insurance stays for the life of the loan if you put down less than 10%, so the only way out is refinancing. On a $420,000 condo, that's real money every month for as long as you own it.
The condo issue is the part people don't see coming. Here's what I'd do before you start touring:
- Ask your lender to quote both loan types side by side, with the monthly payment and how long the mortgage insurance lasts. - Pull up the HUD condo approval list, or send me the complex name and I'll check it. - If you're set on FHA, filter your search to approved buildings from day one so you don't fall for a unit you can't finance.
The approval status also matters when you sell. A complex that shuts out FHA buyers has fewer people able to buy from you later, and that shows up in how long units sit on the market.
So before your heart's set on the unit with the good parking spot, figure out which loan you're really using. Has your lender shown you both?