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A Guide to Getting Your Condo Association FHA Approval

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Key FHA Approval Requirements for Condominiums Many condo boards are not aware that the FHA requires an entire condominium association to be approved under its guidelines prior to any FHA mortgage being issued to a potential buyer. This has shifted the approval responsibility from lenders to the association and the board. Too often, this is only apparent to the association board after a unit owner loses a sale due to the lack of FHA approval. Guidelines require that the FHA consider a variety of factors in the condominium association to ensure that the association is financially sound, properly insured and has good governance practices. It's important to understand these requirements before you apply. Requirements enforced by the FHA include that: • Communities must consist of two or more units • No more than 50% of the property's total floor area in a project or unit can be used for non-residential/commercial purposes • Community has an adequate budget and sets aside at least 10% of the budget for reserves • At least 50% of the units be owner-occupied* • No more than 15% of the units can be 60 days delinquent in assessments • The community must hold fidelity/employee dishonesty insurance covering association employees and managers • A single investor/entity may own up to 50% of the units if 50% of the total units are owner occupied (Prior to 2017 this was 10%) 6 *can be as low as 35% under certain conditions

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