The Federal Housing Administration (FHA) plays a significant role in the condominium mortgage market, with FHA loans accounting for nearly 50% of the market and being used by 70% of first-time condo buyers. The FHA program has evolved over the years to become an integral part of the condominium market.
FHA mortgage insurance has always been available for condominiums, but after incurring losses on condos in certain states, the Department of Housing and Urban Development (HUD) tightened their rules for condo project approvals in 2009. To ensure that the entire condominium project is suitable for FHA insurance, HUD established criteria for project approval and abolished FHA spot approvals. Once a condo project is approved, its units are eligible for FHA condo insurance with a few limitations.
Approvals for condo projects were once perpetual, but in 2009, the FHA changed the rules to make approvals valid for only 2 years. The expiry dates have since been pushed out to a 3 year period, with most older projects expiring between May, July, and August of 2011.
Homeowners can check the status of their condo project by clicking on the ‘FHA Condo Approval Status’ link below
Once a condo project is approved, lenders can use the HUD system to obtain a case number and insure a loan.
However, the lender must also conduct its own “loan level” certification to ensure that the condo is still compliant with FHA requirements.
If the lender finds that the condo is no longer compliant, they are required to not make the loan, even if the project is approved.