FHA financing on condominium projects is changing beginning October 1, 2009. This is a very big deal for buyers because if they can’t get the condominium FHA approved they cannot use a FHA loan which will affect many people. Here are some of the highlights everyone needs to know:
- Changes effective for all FHA Case Numbers assigned on or after 10/1/2009. The spirit behind these changes is to complete a current due diligence of all condo projects.
- Spot approvals are being eliminated. This means, to obtain FHA Financing fora condominium, the project must be FHA-Approved.
- All current condominium project approvals will be invalid (with the exception of projects approved on or after October 1, 2008) and will be required to go through the re-approval process. There will be 2 approval process options:
- HUD Review and Approval Process (HRAP)
- Direct Endorsement Lender Review and Approval Process(DELRAP) This option is available only to lenders who have unconditional Direct Endorsement authority and staff experience in reviewing and approving projects.
- HUD will only accept approval packages from review from:
- FHA Lenders, or
- Builders/Developers
- Going forward, all projects will require re-certification every two years.
- FHA will limit their exposure per project to 30%.
- New construction (or less than <1 year old) will no longer require a 10-year warranty. Condos will follow the same guidelines as SFR, which requires a one-year builder’s warranty, copy of the building permit and certificate of occupancy. Project approval is not required for:
- FHA-to-FHA streamlines refinances
- FHA/HUD Real Estate owned (REO) division sales.
Getting projects back on the approved list is anticipated, initially, to be a long process. And until a project is approved, FHA financing is not an option. Those who have condos for sale right now, may choose to aggressively market their property for a worry-free sale and closing before October 1st.
Work with an experienced HUD-approved lender to get projects re-approved. With the restrictions still in place by the mortgage insurance industry, FHA is still the best choice for low down payments on condominiums.
Call us today with help on how to get your condo approved.
2 Comments
September 29, 2009 at 10:41 am
Are attached townhomes or rowhomes also included in the FHA changes?
September 29, 2009 at 10:56 am
Saga, thats a great question. Townhomes will not be affected by the changes. You just need to make sure that the subject unit part of a townhome only project. I think some projects may be affected if the HOA covers townhomes and condo’s in the same project. I guess we’ll really find out in a couple of days. It takes affect October 1st.