In September 2016, the Federal Housing Administration (FHA) released a proposed update for condominium rules. If you are part of a condo or a condo association, check out some of the most important suggested updates.
Condo Approval Requirements
The biggest update is to the condo approval requirements. The new requirements would retain the baseline property eligibility requirements, such as no short-term rentals and must be single-family units. The FHA loan concentration limits will range from 25 to 75 percent, but the actual range will be established through HUD. At least 50 percent of the units must be occupied by owners. It also requires a 10 percent budget for reserves, but the FHA may allow a lower amount if the association performs a reserve study that proves less money is appropriate.
Exceptions to FHA Approval
One exception to FHA approval is that the FHA can make decisions on a case-by-case basis for specified approval criteria. So, even if you don’t quite meet a criteria, you may still be able to get approved if the FHA is willing to consider your situation and determines to approve you anyway. This applies to commercial spaces too.
The updated procedures would increase approval time from two years to three years, so you have to get recertification less often. The time frame to submit recertification stretches from six months prior to certification expiration to 6 months after expiration, giving you a year leeway. Also, if you manage to apply for recertification during those 12 months, you only have to provide any updated information. If you fail to reapply during the 12 months, you’ll have to start all over and apply for a full review again.
Whenever there are potential changes to HOA rules and regulations, it is important to fully understand them. These updates are meant to make it easier for associations seeking FHA approval, which helps everyone.