Thinking about buying a Pico‑Robertson condo and not sure if FHA or conventional financing fits you best? You are not alone. Condos in this part of Los Angeles often come with unique HOA rules, older building systems, and approval hurdles that affect your loan options. In this guide, you will learn how FHA and conventional loans differ for LA condos, how spot approvals work, what lenders look for in HOA budgets and reserves, and what to expect during appraisal. Let’s dive in.
FHA vs. conventional basics
If you are weighing FHA against conventional financing, start with the fundamentals. FHA generally offers a lower minimum down payment and is more flexible on credit scores, while conventional loans can provide lower long‑term mortgage insurance costs for strong-credit borrowers. For a neutral overview of how each loan type works, review the Consumer Financial Protection Bureau’s guide to mortgage options and loan types.
Here is the condo twist. FHA financing depends on either a project-level approval or a single‑unit path. Conventional loans rely on whether a building is considered “warrantable” under Fannie Mae or Freddie Mac rules. In Pico‑Robertson, where many buildings are small or older, those differences matter.
FHA condo approvals and spot approvals
FHA has two main routes for condo eligibility:
- Project approval. FHA maintains standards for full condo project approval that cover HOA documents, insurance, reserves, owner-occupancy, and litigation. You can learn more about the process on HUD’s page for FHA condominium requirements.
- Single‑Unit Approval (spot approval). If a building is not on the approved list, FHA allows a lender to perform a one‑time review for an individual unit when certain conditions are met. This can be a practical path for Pico‑Robertson’s boutique 6–20 unit buildings.
You or your lender can check the FHA status of a building using HUD’s Condominium Approval List lookup. If the building is not listed, ask your lender about Single‑Unit Approval and the extra documentation and time it requires. HUD’s Single Family Housing Policy Handbook outlines the standards your unit and project must meet, including insurance and minimum property condition.
Pico‑Robertson tip for FHA
Spot approvals work best when you get the HOA packet early. Ask the seller for CC&Rs, budget, insurance declarations, reserve study, meeting minutes, and any litigation disclosures as soon as you go under contract. Your lender will need these to start the Single‑Unit Approval review.
Conventional warrantability and project reviews
Conventional lenders look for a “warrantable” project that meets Fannie Mae or Freddie Mac standards. That includes adequate insurance, healthy reserves or a satisfactory reserve study, acceptable commercial space, reasonable investor concentration, and no adverse litigation.
- Fannie Mae outlines condo project standards and the review types a lender may use.
- Freddie Mac provides an overview of condo and co‑op requirements and project review paths on its Condos and Co‑ops page.
In practice, many lenders apply overlays that are stricter than the agencies. That can mean higher down payment requirements for certain buildings, limits on pending litigation, or a deeper review of HOA reserves. This is common with smaller or older Pico‑Robertson properties.
Down payment and mortgage insurance
Here is how down payment and mortgage insurance usually compare:
- FHA. The minimum down payment is typically 3.5% for credit scores of 580 and above. FHA also charges an upfront mortgage insurance premium and annual mortgage insurance (MIP). In many cases, MIP remains for a long period, especially at higher loan‑to‑value ratios. FHA rules are detailed in the FHA Handbook.
- Conventional. Some first‑time buyer programs allow as little as 3% down, but many condo loans require 5% to 10% depending on the building and lender overlays. Conventional loans use private mortgage insurance (PMI), which is often cancelable once you reach about 20% equity, subject to servicer rules and federal law. For a consumer-friendly overview of mortgage insurance, see the CFPB’s guide to mortgage insurance costs and types.
What this means for your budget: FHA often wins when you need a smaller down payment or your credit is still building. Conventional may deliver lower long‑term costs if you can put more down and later remove PMI.
HOA reserves, assessments, and litigation
Both FHA and conventional lenders will review the HOA’s financial health. They look for sufficient operating income, meaningful reserve funding for long‑term repairs, adequate insurance, and whether any special assessments or lawsuits could threaten the project’s stability.
- Reserves and budget. Thin reserves or no reserve study can trigger tougher underwriting, higher down payment requests, or in some cases a decline. Lenders want to see that the HOA can handle big-ticket items like roofing, painting, or elevator work.
- Special assessments. If there is an assessment, lenders want to know the amount, purpose, whether it is paid, and if it affects affordability. You and the seller can negotiate who pays any outstanding balance.
- Litigation. Material litigation, especially construction‑defect or habitability cases, is a red flag. Routine matters might be acceptable, but major lawsuits often block both FHA and conventional approvals until resolved.
California’s consumer disclosure framework is designed to get you key HOA documents early in escrow. For general disclosure guidance and buyer protections, review the California Department of Real Estate’s Consumer Resources.
Pico‑Robertson tip on reserves
Many neighborhood buildings were constructed decades ago. If the HOA has deferred maintenance or is planning seismic work, ask about upcoming assessments and timing. This can influence which loan is viable and how you structure your offer.
Appraisals and property condition differences
Appraisal standards differ by loan type:
- FHA appraisal. The appraiser must confirm the property meets safety, security, and soundness standards. Issues like significant water intrusion, missing handrails, or obvious hazards typically must be repaired before closing or addressed with an escrow holdback when allowed. For FHA’s property condition framework, see the FHA Handbook.
- Conventional appraisal. The focus is on market value, though serious deferred maintenance can still derail financing or lower value. Minor items may be allowed, but major health and safety problems usually need resolution.
In Pico‑Robertson, you might see few recent comparable sales in the same building and a wide range of amenities from unit to unit. Appraisers often rely on nearby neighborhood comps, which can make pricing sensitive to small differences in parking, storage, or in‑unit features.
What this looks like in Pico‑Robertson
- Boutique buildings. Many 6–20 unit properties or older conversions may not appear on the FHA approval list and can be challenging for conventional warrantability. FHA Single‑Unit Approval can be useful here if the HOA’s budget, insurance, and litigation status check out.
- Mixed commercial space. If a building includes street‑level retail, conventional lenders will scrutinize the commercial ratio. Excessive commercial space can make a project non‑warrantable.
- Seismic planning. Older LA buildings may require or have recently completed retrofit work. Lenders will look at how the HOA funded that work and whether further assessments are planned.
Step‑by‑step game plan for buyers
Use this checklist to reduce surprises and keep your escrow on track.
- Before you write an offer
- Ask for the HOA packet: CC&Rs, budget, insurance declarations, reserve study, recent meeting minutes, rental policy, occupancy data, and any litigation disclosures.
- Check FHA status: confirm whether the building is on HUD’s FHA Condo Approval List. If not, discuss FHA Single‑Unit Approval with your lender.
- Pre‑underwrite the project: for conventional, have a condo‑experienced lender review the HOA documents to flag any warrantability issues or overlays early.
- During escrow
- Document review: have your lender evaluate reserves, insurance, assessments, and litigation. Expect extra time if the lender is doing an FHA spot approval.
- Appraisal and inspection: order professionals familiar with LA condos. For FHA, make sure the unit meets HUD’s minimum property standards to avoid last‑minute repair conditions.
- Negotiation levers: if reserves are thin or an assessment is pending, consider asking the seller to prepay assessments, credit closing costs, or adjust price.
- Budget smart
- Compare full monthly costs: principal and interest, HOA dues, property taxes, and mortgage insurance. Run both FHA and conventional scenarios to see the true monthly difference, not just the down payment.
- Plan contingencies: if the building fails conventional warrantability, be ready to pivot to FHA Single‑Unit Approval if eligible. If an FHA condition becomes a blocker, consider a conventional path with lender exceptions.
Which path is right for you?
- Choose FHA if you need a lower down payment, have developing credit, or you are targeting a solid unit in a small, non‑approved building that can qualify for Single‑Unit Approval.
- Choose conventional if you have strong credit, can put more down, and want the option to cancel PMI later, assuming the project is warrantable.
The right answer depends on your credit, cash, and the building’s profile. Start with the property’s HOA documentation and a lender who knows Pico‑Robertson condos. Small details in the project’s budget, insurance, or litigation can tilt the decision either way.
Ready to compare scenarios on a condo you love in Pico‑Robertson? Let’s map the approvals, timeline, and costs before you write the offer. Reach out to Brandon Kaufman to get a step‑by‑step plan tailored to your unit and HOA.
FAQs
What makes a Pico‑Robertson condo FHA eligible?
- The project must either appear on HUD’s approval list or qualify for an FHA Single‑Unit Approval after the lender reviews HOA documents for insurance, reserves, occupancy, and litigation.
How does conventional “warrantability” affect my loan?
- Lenders use Fannie Mae and Freddie Mac project standards to judge if a building is acceptable; non‑warrantable projects can require bigger down payments or different loan options.
Is FHA always cheaper for first‑time buyers?
- Not necessarily; FHA can lower upfront cash needs, but conventional loans may have lower long‑term costs if you can remove PMI after building equity.
What HOA documents should I request first?
- Ask for CC&Rs, current and prior year budgets, insurance declarations, reserve study if available, recent meeting minutes, rental policy, occupancy stats, and any litigation disclosures.
Will litigation automatically kill my financing?
- Not always, but significant construction‑defect or habitability lawsuits often block both FHA and conventional approvals until the risk is resolved or fully insured.
What appraisal issues should I expect with older LA condos?
- Appraisers may note safety items and deferred maintenance; FHA is stricter on repairs tied to health and safety, while conventional can be more flexible on minor issues.
