FHA Condo Approval Tips: Owner-Occupancy

October 22, 2019 Andrew Fortin

When the Federal Housing Administration (FHA) is reviewing a condominium association's application for certification, there are serval criteria that can trigger an immediate rejection. In our work with clients, a common issue we see arise is the ratio of owners to renters or owner-occupancy ratios.  Here are some tips to avoid this pitfall.

What are FHA requirements on condominium owner-occupancy?

FHA’s role is to back mortgages it issues, so it makes sense that they would want to evaluate data to assess the risk of the loan. One area of concern is the ratio of owner-occupants to renters.

To obtain FHA approval, an existing condominium association must have at least 50% of the units owner-occupied or sold to owners intending to occupy the unit. FHA will allow this requirement to be as low as 35% under certain conditions.

If the owner-occupancy is less than 50% but not lower than 35%, the association may still obtain FHA approval, however, FHA will require additional documentation. In such cases, FHA will require that the association show:

  • That reserves are funded at an annual amount equal to 20% of the budget.
  • No more than 10% of the units can be 60 days late in their assessment.
  • The association must provide three years of acceptable financial documents.

If your association owner-occupancy is below 50%, FHA approval is not out of reach, but it does require some extra documentation.

Why Associa FHA Assist?

FHA backed mortgages are an attractive form of financing, especially for condo buyers. Prior to any purchaser obtaining an FHA mortgage, the entire association must be approved by FHA. Once an application is completed, it can take up to 30 days to get FHA approval for your association. What that means is if your association waits until a unit owner has a buyer wanting to use FHA, the time frame for approval may result in a lost sale. The best way to help ensure your association is marketable to the broadest range of buyers is to get FHA approval. Approvals are good for two years. Natalie,  Associa’s FHA assist lead can help! She can be reached at Nayers@associaonline.com

 

 

About the Author

Andrew  Fortin

As senior vice president of external affairs, Andrew oversees Associa’s public affairs, media relations, government affairs and corporate citizenship efforts. Bringing more than 20 years of experience in the public and government affairs arena, Andrew’s focus is working with Associa’s clients, industry colleagues and business partners to ensure a vibrant future for client communities and Associa employees.

More Content by Andrew Fortin
Previous Article
Partner Post: Make Sure Your Fitness Amenity is Ready for 2020
Partner Post: Make Sure Your Fitness Amenity is Ready for 2020

The last few months of the year are a great time to give your fitness amenity some attention.

Next Article
Partner Post: The Right Way to Handle Neighbor Conflict
Partner Post: The Right Way to Handle Neighbor Conflict

Here are five tips for how to best handle conflict with neighbors.

Did you enjoy this content?

Let us know!