You live in a condo, but it is not an FHA approved condo. Is that a big deal? If you already own it, you might not think so, but for future value, ease of selling, and even future refinance options, it could be a big deal to you. If a condo association is not approved by the FHA, it means that no FHA financing can take place in the sale of any of the units. This could greatly hurt people that live there and are actively trying to sell as well as those that do not qualify for any other type of financing. That being said, it pays to push for FHA approval on your condo building.
First Time Homebuyers are a Great Target Audience
Typically, but not always, first-time homebuyers want a condo. This is not to say that only first-time homebuyers are going to purchase in your building or that FHA financing is the only option, but it is a lucrative option for many people. If you wish to sell your condo or even if your neighbors want to sell, having the option to entertain FHA financing is crucial. It allows more people to come through and look at the unit, giving you a higher chance of getting it sold. Granted, many other people live in condos that are not first-time buyers, but even many of them will desire to have the option of FHA financing.
Values may Increase
It might seem strange that having the option to offer FHA financing could increase your value, but if your condo does not sell because the FHA did not approve the association, fewer people are going to look at the condo. This could mean that it takes longer to sell the unit, which could force you to drive the price down, which over time brings the value down. The more units that settle for a lower price in order to get the unit sold, the lower the value will become in the end.
Refinancing Options include FHA Loans
If you do not live in an FHA approved condo, you cannot even refinance into an FHA loan, which many people are doing these days. Even if your original loan is not FHA, if you have lower credit, a higher debt ratio, or a different employment situation today, you might need the flexibility of the FHA loan. If the association is not approved, though, you do not have that option.
It is not hard to get a condo association FHA approved – it simply takes a little paperwork and time. The association must provide the FHA with the following information:
- 50 percent of the units must be sold and owner occupied
- 85 percent of the unit owners must be on time with their association dues; if more than 15 percent are more than 60 days late, the association is ineligible
- There must be proof of proper insurance including liability, hazard, and flood if necessary
- There must be proof of a budget
- The minutes from any association meetings must be provided
- Any future plans must be provided as well
The 95-page document that breaks down the FHA condo approval process can seem overwhelming, but once an association starts the process, they can see that it is not as bad as it seems. In the end, everyone wins with an FHA approved condo, so it makes sense to push for that with your condo unit to ensure the ease of sale and refinancing for the future.