Ensuring that your condo or townhome
association is on the FHA approved list is important to everyone because:
1. Potential buyers may not
otherwise qualify to purchase a home in your association.
2. Current owners who may
want to sell one day will have a larger pool of buyers for their unit.
3. And it’s important to the
association itself, as that larger pool of buyers helps create more competition
which raises unit prices.
In years past, an FHA-approved association wasn’t
so important because lenders could do “spot loans” for specific units. New laws changed the way things used to be
done so that the FHA-approved pool of buyers can now only purchase in
associations which as a whole, are approved for FHA financing.
The HOA must have:
·
At least 50% occupancy by owners
·
No more than 15% of units being delinquent
by 30 days on assessments
·
No more than 25% of total floor space used
for commercial purposes
·
At least 10% of the annual budget going to
reserves
·
At least two or more units
·
Insurance coverage, including hazard,
liability and flood (if needed)
·
No more than 10% of the units owned by a
single entity
·
All units and common spaces completely
built
·
Association must also be in compliance with
state law and other applicable regulations.
How to Obtain or Renew
FHA Approval
1. Find out if your
association is currently approved by visiting the HUD website at https://entp.hud.gov/idapp/html/condlook.cfm. Condo and town-home associations must reapply
for FHA approval status every two years.
2. If your association is
approved:
the HOA must simply reapply when its two-year period is coming to a close.
3. If your association is not approved: there are two ways to
gain approval:
i.
If a potential FHA buyer is working with a
large lender, that
lender is likely eligible to certify your
association through the Direct Endorsement Lender Review and Approval Process (“DELRAP”).
Certification can take two to four weeks; or,
ii.
The association can apply directly through
the HUD Review and Approval Process (HRAP), which can take four to six weeks.
Both routes have their
pros and cons. The HOA Board will need
to discuss what works best for the association. As with any major policy, the Board should
communicate its decision to the homeowners.
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