The Tress Realty Group works with condominium communities to certify them with the Federal Housing Authority (FHA). This certification allows condo unit owners to finance the purchase of their homes with an FHA loan.
Below are the Pro’s & Con’s of being an FHA certified community as well as some Frequently Asked Questions for determining if certification is worth the time and expense.
Please call us at (732) 515-9696 to discuss getting FHA certified or email us at firstname.lastname@example.org so we can answer all of your questions.
This page is designed to provide FHA Loan Certification information for condo development board members, and information for individuals buyers of condos. Condo board members should contact Natalie Stewart, President of FHA Review, Inc. (email@example.com) for information on FHA certification. Home buyers should contact the Tress Team at Keller Williams for more information on qualifying for an FHA loan (firstname.lastname@example.org).
The article “Pros, Cons, and Misconceptions of FHA Condo Approval” and "FAQs" was written by and used with permission by Natalie Stewart, President, FHA Review, INC.
FHA Review is a Third Party Submission service specializing in both the FHA and VA Condominium Certification processes. Please contact email@example.com or visit www.FHAReview.com for more information on their service.
FHA condo approval dramatically increases the pool of potential buyers
Statistics show that approximately 60% of new homebuyers intend to use an FHA Loan. If your community does not have FHA condo approval, you potentially limit the buying pool to only 40% of homebuyers.
Increased Home Value
FHA approved Condos have a larger pool of prospective buyers, therefore increasing competition and demand for the product. This can result in higher purchase prices and an increase in market value. This can ultimately increase the value of all units throughout the community.
Realtors are more likely to bring their clients FHA Approved communities. These units with FHA financing approvals are easier to sell and most often sell for higher prices than similar condo associations that are not approved.
Fewer Renters in the Community
Generally speaking, Buyers who use FHA loans are more likely to reside within the unit, and not rent it out. Conversely, communities without FHA approval most likely will attract buyers that can make large down payments for conventional financing. These buyers are usually investors who will rent out the property for a profit.
Board Members and Property Managers are expected to maintain property values in their communities. Several HOA attorneys advise that it is the fiduciary duty of the condo Board to apply for FHA condo approval to maintain or increase property values for residents.
At this time, experts agree that there are no “cons” to being FHA Certified. However there are sever misconceptions about FHA Condo Approval. Remember, chances are, your community was certified when it was first developed and it may just need to be re-certified.
The FHA is a lender – FALSE
The FHA provides mortgage insurance to banks, credit unions, and other lenders. In turn, these lenders make loans that meet insurance standards. If the loan defaults, the FHA reimburses the lenders for a portion. They do not “approve buyers.” This is still done by the lender/bank, just like conventional loans.
To use an FHA Insured Mortgage, there is a minimum set of standards that must be met by a potential mortgagee. However, each lender enforces additional requirements based on their own best practice. These requirements include mortgage score, credit history, bankruptcy and foreclosure/short sale history, and employment verification.
If we become FHA Certified, the FHA will have control over our community – FALSE
The FHA will not have any “control” over the governing of the condo community. An FHA certified community has no obligation to maintain its certification, and the FHA does not monitor the association. When a condominium is placed on the FHA connection list, the FHA is simply certifying that the Association meets requirements set forth in the FHA Handbook.
FHA Loans caused the housing crisis – FALSE
No. The FHA does not lend money. It insures loans that meet their standards. Sub-prime loans, interest-only payment options, negative amortization loans, faulty appraisals, and limited underwriting are some of the causes of the past mortgage crisis. FHA Insured loans are a big part of how the housing market came back.
The guidelines are too strict and its cost prohibitive – FALSE
Well-managed and financially stable communities have no trouble becoming FHA approved. And if the development qualifies, Tress Realty and Movement Mortgage will pay all of the costs to get a development certified.