What are FHA approved condominiums?
FHA approved condominiums are condominiums that meet the eligibility requirements set by the US Department of Housing and Urban Development (HUD). If you’re interested, in purchasing a condo using an FHA loan it must meet these criteria.
Do you want to check if a specific condo complex is approved by the FHA? You can search for it on the master list of FHA approved projects.
However there is an exception called “site condos” for situations where a condo development’s not on the list or its approval has expired. In cases the project would need to go through an approval process or get re certified before being eligible, for an FHA loan.
Site condos must adhere to criteria;
- A condominium unit encompasses the structure, including the site and air space. No part of the structure is considered areas or limited common areas.
- The unit holder is responsible, for insurance and maintenance costs. Any common assessments collected are for amenities that’re not part of the units area.
- HUD has introduced an approval process for condo projects, which will expire on August 31 2016. The agency is expected to release guidelines before that date.
General Approval Guidelines;
- Projects must have two units.
- Non residential/commercial use cannot exceed 25% of the projects total floor area (with exceptions possible upon HUD approval up to 50% or more).
- No single investor/entity can own than 10% of the units (unsold or unoccupied units held by the builder are excluded from this count).
- Homeowners association fees for no than 15% of all units can be delinquent by 60 or more days.
- Units must have hazard, flood, liability and other insurance as required by state law and acceptable to HUD (properties with 20 or more units require a Fidelity Bond).
- Financial documents required for review include the years budget, current balance sheet, actual income and expense statement, for the project and possibly bank statements.
To meet the requirements it is necessary for, at least half of the units in the project to either have been sold or have a contract with owner occupant buyers.
Approval for condominium projects will last for two years from the date they are added to the FHA approved condo list. To ensure compliance with HUD regulations recertification must take place every two years. The process can begin up to six months before the expiration date. Can continue until six months after. If this timeframe is not adhered to a complete re approval will be required.
Recertification packages can be submitted by authorized individuals such as mortgagees, builders, developers, homeowners associations, management companies or legal representatives acting on behalf of any of these parties. Usually applications directly from borrowers, homeowners, sellers or real estate agents will not be. Will be returned by the submitter. However HUD may consider submission sources on a case, by case basis.
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