Why All Condo Communities Should Be FHA Approved
At the start of 2010 the entire game changed for obtaining FHA insured loans for condominiums. Before a condominium communities could offer FHA Guaranteed Mortgage Services they had to prove that they met these new requirements.
Many Homeowners Associations (HOAs) were not aware that HUD was requiring new and tougher criteria to get their complexes approved. On the other hand, some of them knew about the changes but just didn’t care and others didn’t know how to go about getting HUD approval.
Regardless of the reason the end results were the same for the condominium owners that wanted to sell their condos, the owners that wanted a reserve mortgage and prospective condo buyers. They could not use any FHA Insured financing until the complex successfully completed the Approval Process.
Becoming HUD/FHA Approved is very important for all condominium complexes because almost 50% of condominium buyers use FHA Insured loans to purchase their units. Being FHA Approved will allow the homeowners 50% more prospective buyers over non-approved communities. This will make it much easier for your homeowners to sell their condos and it will also ensure that the condominiums in your HOA will have a higher market value over non-approved HOAs.
Over 90% of all condo owners that qualified for a reverse mortgage used the FHA Insured Program. In fact an FHA reverse mortgage is the only way to obtain a reverse mortgage on a condominium in most markets. Without FHA Approval the HOA is cutting off their senior owners form a very valuable resource. In some cases a reverse mortgage is the only way the condo owner can stay in their home.
The belief that some HOAs have is that they think that offering FHA Financing will attract “Undesirable” buyers. This reasoning is usually brought about by the fact that the FHA requires as low as 3.5% down payment for a condo purchase while a conventional mortgage can demand up to 20% and sometimes more. A lower down payment equates to deadbeat buyers in some HOA boards minds.
First, a higher down payment is not the key to mortgage success. VA mortgages are almost always made with zero down versus around 3.5 percent for FHA financing and up to 20% percent for conventional loans. Of all these the VA loans have the lowest foreclosure and delinquency rate. When you realize that toward the end of 2011 4.29% of conventional mortgages nationally were in foreclosure while only 3.24% of FHA loans faced the same fate that argument goes out the window.
Cost is another reason HOAs give for not pursuing FHA approval. It is possible to get your community HUD/FHA approved for under $50.00 (not counting the labor time). This can only be accomplished if the board, or their agent, is willing to do a lot of work. They must be willing to properly fill out the application, gather the required documents, furnish all the information that is needed and submit that information in a format and manner that HUD will accept. HOA Educational will advise you on your submission for free.
Some HOAs believe that getting FHA Approval doesn’t do anything for the HOA. The HOA should remember that their only purpose is to oversee the running of the complex in an orderly, efficient and monetarily sound fashion for the greater good of the community. This should include any help that they can offer a condo owner to facilitate selling, re-financing or acquiring a reverse mortgage for a condominium in the complex.
For the HOA board to choose not to become HUD/FHA approved is not looking out for the complex’s and/or the individual owner’s best interest. The HOA board should remember that at some point in time – Every Single Owner In The Entire Complex Will Want To Sell Their Condominium! The ability to offer FHA Insured Mortgages just makes these goals much more attainable.
If you want to receive a free review of your HOA to insure that it qualifies for HUD/FHA approval or find out what changes will be needed to become HUD/FHA compliant Please Click Here and fill out a short online questionnaire or call us at (800) 526 0103 and we can complete the questionnaire over the phone.
Call Us At (800) 526 0103
You Can Also Email Us