Know why your HOA should seek FHA approval – Article by Peter Harper

Article by Peter Harper

The Federal Housing Administration more popularly known as FHA has a  particular set of guidelines that lenders should follow in case they want to  offer an FHA mortgage. These FHA mortgage loans have down payment criteria  that is smaller than traditional mortgage  and can even be availed by consumers who have low credit scores. If one  wishes to make a smaller down payment, then they should seek a lender who  works with a home owner’s association that is FHA approved. Getting your home owner’s association (HOA) FHA approved has its own perks. The primary  of this is that the marketability of the housing units of your community  increases. Also, you are able to cater to a wider variety of buyers as the  number of individuals wanting to get an FHA approved mortgage is increasing  because of the flexibility of conditions. In the present market condition,  buyers have become quite cautious hence, your HOA should learn to be updated  with the market.

What are the criteria an HOA should meet to seek FHA approval?

It should be kept in mind that an HOA should seek FHA approval only under  certain circumstances. In case the homes in your society have sufficient  marketability even without an FHA approval, and only a few sellers are  interested in availing FHA approval, then should handle the process for their property on their own. However, it is best to seek an FHA approval to  be on the safer side. There are several criteria that an HOA should meet to  qualify for a FHA approval. These are as follows.

1. The HOA won’t be allowed to use more than 25% of the square footage of the housing complex for commercial purposes.

2. Not more than one-tenth unit of the total complex can be owned by the same person.

3. Of the total amount of regular assessments of the association, 10%  should be going for its reserves.

4. At the least half of the total number of housing units must be  occupied by their owners

5. A maximum amount of 15% of the total number of units is allowed to be  30 days behind on assessments.

6.A particular unit should be the place of primary residence, in order  to qualify for an FHA loan.

7. At least 30% of the units in a complex must be sold before a single  FHA loan can be approved.

Although some of the criteria are quite complex but they have been  deliberately made so, so that only the responsible home owner’s associations  are able to qualify for it. The FHA certificate that your HOA has received  needs to be upgraded every two years.

What are the issues that have led to HOA seeking for FHA approval?

1. High certification standards – In the present state of economy, with the downturn since 2009, home owners’ associations are finding it difficult  with foreclosures being prevalent. The problems are faced in the areas of  allowable delinquencies of assessments and reserve funding balances.

2. The certification process is kind of moving target – Different certification vendors have claimed different criteria based on their  individual experiences of working with FHA representatives. The FHA had to  relax the standards after announcing several criteria in 2009 so that it  proves to be a viable option for HOA financing. Also different vendors had  claimed different criteria when it came to calculating delinquencies until the FHA came up with a proper certified standard.

Thus you can see getting a certification from the FHA is quite important for a home owner’s association to function properly, increase its market  demand and make the home selling process effective.

– For more information about seeking FHA approval, click here

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