So, you’ve made the big decision to buy a condo! While exciting, it’s important that you have a clear understanding of how you can afford the mortgage for the condo, which can help aid in your approval for one. Here’s what to know about the FHA condo approval process.
In order to get your condo FHA-approved and therefore able to accept an FHA mortgage, you must complete either the U.S Department of Housing and Urban Development (HUD) Review and Approval Process (HRAP) or a Direct Endorsement Lender Review and Approval Process (DELRAP).
FHA Appraisal and Influential Factors
Once you finish this paperwork, the condo must go through an FHA appraisal in order to ensure that it meets the requirements and standards of the FHA.
Factors that can influence approval include the following:
- The age of the building (older buildings may take longer to be approved)
- How quickly the FHA receives the proper documents
- How eligible the condo complex is for FHA approval
- The current caseload of the FHA, which can cause delays
Generally, it takes approximately 2-4 weeks for a condo to be FHA-approved. However, this approval is not permanent; the condo must be recertified for FHA approval once every three years.
FHA Condo Approval Requirements
The FHA requires the following before approving your condo:
- The property must be completed in its entirety
- The property must be insured for flood, hazard, and liability insurance as well as others required by state law and HUD
- The condo’s homeowners association (HOA) must have at least 10% of its budget in a cash reserve
- No more than 15% of condo units may be more than 60 days delinquent in paying their HOA dues
- Only 50% (or less) of the units can be used as rentals or be owned by investors
It’s important to bear in mind that even if your condo complex hasn’t been FHA-approved, your individual condo may be with a “spot approval.” However, the condo complex must still meet all of the FHA standards.
If your condo lacks FHA-approval, you won’t be able to buy it using an FHA loan or sell to a buyer with an FHA loan.
The condo-buying process can be both complex and confusing. Fortunately, a real estate attorney can help.
Palumbo Law’s Team of Real Estate Attorneys Represent Buyers, Borrowers, Sellers, and Lenders in Rhode Island
At Palumbo Law, we understand that buying a home can prove quite complex. Our team is committed to delivering quality service and can handle all aspects of your residential purchase. We prepare all the necessary legal documents, including loan documents, deeds, and other closing documents, assist with obtaining financing, represent clients at closing, record documents, and obtain final Title Insurance policies. By handling all the details, we minimize the stress so that our clients can focus on their daily routines. To learn more or to schedule a free consultation, call us today!