Single-Family Cooperative Mortgage Insurance (203(n))

Summary:
The Section 203(n) program insures loans for persons buying a unit in a cooperative housing project. The loan is made by a lending institution, such as a mortgage company, bank, or savings and loan association, and is insured by HUD's Federal Housing Administration (FHA).

Purpose:
The purpose of FHA's mortgage insurance programs is to encourage lenders to make mortgage credit available to borrowers who would not otherwise qualify for conventional loans on affordable terms (such as lower income families and first-time homebuyers) and to residents of disadvantaged neighborhoods (where mortgages may be hard to get).

The basic FHA mortgage insurance program is Mortgage Insurance for One- to Four-Family Homes (Section 203(b)), which offers homebuyers lower initial costs and lower downpayment requirements, and allows borrowers to fold some of the closing costs into the loan. Section 203(n) is one of several FHA programs based on Section 203(b) that have special features--in this case, financing structured to meet the needs of persons who are buying a corporate certificate and occupancy certificate, the instruments that enable them to own a share of and live in a cooperative housing project.

Type of Assistance:
The program insures a loan to purchase an apartment in a residential cooperative--which can be a detached or semidetached building, a rowhouse, or a multifamily building.

To make sure that its programs primarily serve low- and moderate-income people, FHA sets limits on the dollar value of the mortgage loan. These limits vary from year to year and by region. The maximum amount of the loan is the same as under Section 203(b) Current FHA mortgage limits and other information can be found on the Internet.

Many of the terms of Section 203(n) insurance are the same as those governing basic FHA single-family mortgage insurance. Borrowers can finance 97 percent of the price of their cooperative ownership, and that financing can include many of the closing costs involved in buying a home. Because they can borrow so much of the price of their unit, the downpayment can be a low as 3 percent.

Eligible Grantees:
FHA-approved lending institutions can make insured loans under Section 203(n) through HUD Field Offices.

Eligible Customers:
All potential owner-occupants who can make the monthly mortgage payments are eligible to apply.

Application:
Applications must be submitted to the local HUD Field Office through a FHA-approved lending institution. HUD's website offers an interactive directory of approved lenders.

Technical Guidance:
This program is authorized under Section 203(n) of the National Housing Act (12 U.S.C.) and the Emergency Home Purchase Assistance Act of 1974, Public Law 93-449, 88 Stat. 1364. Program regulations are in 24 CFR 203.43c and 203.437. These regulations, as well as handbooks, notices, and letters relevant to this program, are available through HUDCLIPS (http://www.hud.gov/hudclips). The program is administered by the Office of Single-Family Housing Programs in HUD's Office of Housing-Federal Housing Administration

For More Information:
Ask the Director of Single-Family Housing Programs in your local HUD Field Office for more information on this and other single-family mortgage insurance programs. Homebuyers can also contact a HUD-approved lender for a searchable listing of approved lenders nationwide, a HUD-approved housing counseling agency (http://www.hudhcc.org), or the toll-free FHA Mortgage Hotline, 1-800-CALLFHA.