Buying a condominium these days require a number of stages for a Federal Housing Administration (FHA) approval, including the series of an FHA approval for qualification before the loan is approved. Since such possesses a unique sort of ownership, it modifies the way an FHA financing transpires.
Commonly, the process is considered accomplished when the structure has already been materialized and built, but then again, some factors may change such and in turn, alter the circumstances as well. FHA has its own list of approved developments where a standard list of requirements on various topics must be met. In order for a unit to pass for its financing, one must be included in the list provided by FHA itself where the process would usually take two (2) weeks to three (3) months, provisional on the project’s status, and how much requirement/s still need/s to be accomplished. Once the developer is done building the project and the condominium is not on FHA’s list already, the matters would be taken care of by the development’s association in the management of the approval process.
FHA’s condominium approval process may be divided into different categories, depending on the stage of the condominium. Such are:
- Condominiums that are still in the proposal stage
- Condominiums built for less than a year
- Condominium that has been built but has not been turned over to the association yet
- Condominium units that have been built for more than a year and that have already been turned over to the association (Existing condominium developments)
- Condominium units already approved by the Department of Veterans Affair (VA)
- Condominium units already approved by Fannie Mae
FHA will then evaluate and sort the project on one of the above categories it befalls to determine the requirements and span of time it would necessitate for the completion of the process.
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PROPOSED CONDOMINIUM BUILDINGS
The most labor inducing category among the given is the first or the development that is still in the building process since there is no history of development is available for reviewing and that the developer is still starting from scratch. Hence, the best time to start the process demands to be as early as possible for insurance that the completion would catch up by the time the units are already sold and closed.
The essential documents/information are as follows:
* An accomplished application sheet for Environmental Review on The Department of Housing and Urban Development (HUD) 92250
* A complete description of the development that includes the number of units, description of the structure, and common areas of the project
* A map of the development and its surrounding area
* A certificate of Equal Employment Opportunity
* An accomplished HUD Affirmative Fair Market Housing Plan Form (HUD-AFMHPF) sheet
* A written statement from the Historic Preservation Office stating the acceptance of the project
In the event that the environmental review has already been accomplished, the FHA will, again, require a new set of documents regarding the construction of units, operating budget, other legal papers, and the management plan – whereas the budget and management proposals would be reviewed by HUD in guaranteeing the reasonability and adequacy of such.
Only by accomplishing such requirements with approval will the process of conditional approval for putting the units on the market will the FHA financing start. Then again, there would still be conditions stipulated for the units’ presale such as the requirements for owner occupancy as well as the necessity to provide the site survey, and proof of a minimum one (1) year warranty against any contractors’ defects or defaults.
CONDOMINIUMS BUILT FOR LESS THAN ONE YEAR
The developments that are still in the process of construction or have been in existence for less than a year would also undergo a similar process – only with fewer requirements since the main difference between projects that have already been in existence for less than a year is the maximum Loan to Value (LTV) allowed. Without a minimum ten (10) year warranty, the maximum LTV is ninety percent (90%) for the FHA financing which differs from the standard FHA financing that commonly requires only a three and a half percent (3.5%) down payment as opposed to the ten percent (10%) down payment – which is also another factor to consider when purchasing a unit.
The following provisions must be met to obtain a condominium unit that has only been built for less than a year:
* A written request for approval having the project’s development, together with the number of units it will contain and the types of common areas
* Map of the area
* Schedule of condominium development
* Legal documents for the development penned by a Lawyer
* The proposed budget for the association
* The proposed management plan for the condominium
* Up-to-date status of the development’s finances and reserves
* Proof of previous association meetings that transpired
The Field Office will then conduct a number of inspections in determining the eligibility of the project development once the appropriate documents are handed over. Once the inspections are passed, the development appraisal which is detrimental to the process will then take place.
CONDOMINIUMS BUILT BUT HAVE NOT BEEN TURNED OVER TO THE ASSOCIATION
Condominium developments that have already been materialized yet still have unsold units are the ones that might not have been turned over to the association yet. Still, these types of condominium developments would be approved by the FHA as long as additional requirements to the standard requirements above are successfully fulfilled.
The following are the additional requirements listed by FHA:
* All building of units must be completed; there would be no plans for future expansion – if there would be such plans, the developer would be undergoing the requirements for condominiums built for less than a year process.
* The developer must provide a concrete evidence that the project is completed
* The developer must provide the proof of a solid budget
* The developer must provide the management agreement
Another difference for condos already built but haven’t been turned over to the association is the buyers’ privilege and ability to a maximum financing from FHA, which means that ninety-seven and a half percent
(97.5%) LTVs are allowed as long as the construction is complete, and the structure passes the FHA requirements.
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EXISTING CONDOMINIUM DEVELOPMENTS
These developments applying for FHA condominium approval are those which structures have already been completed and existing for more than a (1) year. Whereas the difference is, the homeowners have already taken over the association and the control is no longer under the developer’s responsibility, and that the association itself has the ability to request an approval from the FHA together will the submission of the following documents:
* Written request for FHA approval
* Legal documents (any) pertaining to the development
* Recorded survey
* Thorough description of the income, expenses, and reserves of the association
* Minutes from the last two (2) association meetings
* Certification directly from the association stating that a minimum of fifty-one percent (51%) of the units are occupied by the owner
* Evidence that there are no constructions defect/s in the structure
* Proof that there is no outstanding litigation from unit owners against the development
CONDOMINIUM DEVELOPMENTS APPROVED BY THE VETERANS AFFAIR (VA)
Amongst the above-given situations, the condominium developments that have already been approved for VA funding has the least complicated procedure in obtaining an FHA condominium approval. Only the following items are to be provided in securing an approval from FHA:
* The approval letter from the VA
* Copies of legal documents (any) that have been recorded
* Recorded survey and plat
* The proposed or existing budget
* Minutes from any association meetings
* Undergo an onsite inspection to ensure the sustainability of the project
* Proof that at least fifty-one percent (51%) of the structure is occupied by homeowners
CONDOMINIUM DEVELOPMENTS APPROVED BY FANNIE MAE
Application for FHA approval by developments already approved by Fannie Mae is very simple. Only three (3) requirements need to be obtained which are as follows:
* Federal National Mortgage Association (FNMA) Form 1026 Application OR FNMA Form 1027 Conditional Project Acceptance
* Supporting documents (any) that render the Fannie Mae approval
* An onsite inspection to ensure the satisfaction of HUD’s requirement for the FHA condominium approvalClick to See the Latest Mortgage Rates»