Understanding the FHA Condo Approval Process
Federal Housing Administration Condo Approval Process for 2022
Acquiring Federal Housing Administration (FHA) approval for a condo can be a difficult process, but it is a necessary one if you are hoping to obtain a Federal Housing Administration loan or utilize any of the benefits associated with FHA loan approval.
To help explain the different aspects of the process, we’ve created the following guide to break everything about FHA approvals in 2022 down into short, easily-digestible sections.
What is an FHA loan?
FHA loans are insured by the government’s Federal Housing Administration, and are an affordable option intended to assist home buyers with a lower down payment requirements and more relaxed credit and underwriting guidelines.
What is an FHA-approved Condo?
Condos that are FHA-approved are condominiums that have fulfilled the FHA’s requirements to be eligible for an FHA loan. Approved condos can be more challenging to find, as condo associations are sometimes leery about owners who need lower down payments to qualify.
Is My Condo FHA-approved?
You can easily check if your condo, or the condo you wish to purchase, is FHA-approved by browsing the list of approved condos on the Department of Housing and Urban Development’s website.
How Long Does the Process Take?
Receiving FHA Condo Approval typically takes between 2-4 Weeks, but this timeframe may vary depending on a variety of factors, such as the eligibility of the condo community or the volume of cases that are already being processed by the FHA.
How Much Does An FHA Condo Approval Cost?
The total cost of FHA approval is tied to the condo’s current standing with the FHA:
- For condos that has never been approved, or expired over 6 months ago – $895
- For condos that were previously approved and are currently up for renewal, or ones that have been expired for no more than 6 months – $795
How Long Will My FHA Condo Approval Last?
Once approved, your FHA certification is valid for 3 years. Throughout the certified period, community members will be able to utilize FHA insured loans, HECM reverse mortgages or loans, and they will also have the option of refinancing by way of an FHA insured loan.
What Do I Need To Qualify For An FHA Condo Approval?
You will need a series of legal, financial, and various other documents in order to get started with the FHA condo approval process, a complete list of which can be found here.
In many cases your mortgage company can assist the HOA in gathering the appropriate documents and submitting for approval. A best first step is to consult with the HOA and your mortgage company to explore the feasibility of FHA approval.
Note that your condo community will likely not qualify if it does not follow specific guidelines, such as:
- The condo must be complete, and not in the midst of being built.
- No more than 35% of the property can be dedicated to commercial use, and no more than 50% of units can be used as rentals.
- Condo must allow leasing or will lose eligibility
- Condo cannot have a seasoning clause in place
- The condo association must maintain a reserve savings account, funded by at least 10% of the HOA’s budget.
- Board cannot approve or deny leasing, except to maintain a leasing cap.
Condo developments that are seeking FHA approval must complete either the HUD Review and Approval Process (HRAP) or the Direct Endorsement Lender Review and Approval Process (DELRAP.)
Following approval, the condo community will be identified as an organization that accepts FHA-insured loans, and will receive a unique condo ID and submission number as proof of the certification.
NJ Mortgage Resources Can Help
At NJ Mortgage Resources, we understand that the FHA approval process can be stressful, as can the many other elements that come with buying a home or seeking financing. We want to make sure that no one feels overwhelmed, and this is why we’ve created an easy-to-use “handbook” of resources for current and potential New Jersey mortgage holders.
Click here if you would like one of our lender partners to contact you with additional assistance about FHA condo approvals.