In 2006 FHA loans accounted for a mere 1.7% of all mortgages. The maximum FHA loan amount for a condominium was limited to $369,000. The wide availability of conventional mortgages with 1) higher loan limits, 2) little or no down payment required and 3) insubstantial income documentation requirements made FHA loans unattractive by comparison.
Times have changed and FHA loans now account for almost half of all new mortgages. A primary reason for the significance of FHA loans today is the large increase in the maximum FHA loan amount, which is now $793,750. Also, the availability of conventional loans, especially the high-risk variety that was so infamously prevalent, has dried up.
The down payment required for an FHA loan today is only 3.5%, while current conventional loan guidelines and mortgage insurance companies require a 20% to 25% down payment for condominiums.
Today, those who choose not to have their condominium project FHA approved are in essence limiting the pool of potential home buyers to only those that can make a 20% or greater down payment.
Absolutely not! "FHA-approved condo" does not equate with "low-income housing." An FHA-approved complex allows any buyer to potentially purchase a home in your complex at the actual sales price. In fact, many smart, well-informed buyers will choose an FHA-approved loan over a conventional loan because of the more competitive interest rates, lower down payment, and because it can be far easier to qualify for! Further foreclosure rates for FHA loans are 1/5 those of conventional loans because the FHA stands behind the consumer during difficult times. In these economic times, many buyers are choosing FHA-approved complexes for these reasons.
The FHA approval process can be a profit center for management companies and condo associations. Your company can choose to charge condo buyers any appropriate fee related to your determination to be an FHA-approved complex. Because your complex will be FHA-approved, the number of potential buyers will be increased, as will your ability to collect necessary fees and dues.
FHA financing can have a loan value of 95% of the purchase price, which means that your homeowners will be able to recoup nearly the total value of their homes when selling or refinancing; this is difficult to find in the conventional loan market. Buyers are your future homeowners. Knowing that they a) will be more likely to qualify to buy a home within your complex and b) will be able to economically refinance their homes in the future, makes the condo more likely to sell.
*** Effective September 2015, HUD instituted a new approval process for FHA condos. In order to provide buyers the option of financing a condo with an FHA loan, the condo development must be approved by HUD under new guidelines. The approval lasts 2 years, so approvals now have an expiration date
By clicking here, you can look up any condo complex to see if it is already FHA approved and what its current expiration date is. If it is not approved, the condo association must submit the docs listed on this checklist to HUD.