Why Is FHA Financing so Difficult in Condo Developments?

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Back in 2010, the Department of Housing and Urban Development (HUD) started enforcing their longstanding and strict regulations on condominium approvals, which includes a rule that mandates re-certification every two years. Prior to 2010, these guidelines weren't really followed; now, however, all condo projects are held to the same level of restrictions and entire projects must be certified as a whole. This means that all condo communities must go through the same rigorous process of re-certification every two years, which basically means they have to fill out the same paperwork they did at the time of the initial approval process.

The result: condominium communities have allowed their FHA approval status to expire without going through any re-certification process. The downside to this is people who would like to use an FHA loan will not be allowed to buy in a condo development or community. This reduces the pool of potential buyers, causing condo prices to drop because there are fewer buyers in the market.

So, what is the solution now that 95% of condominiums are not FHA approved? It really comes down to urging the non-FHA condo projects to bite the bullet and become approved. This will move properties for sale by opening them up to a whole new pool of buyers - effectively increasing demand and upping prices. Home Owners Association boards of directors, with the help of their community managers, can do a lot of the work themselves and become FHA approved - or, they can hire an independent FHA approval facilitator to do the job for them. A significant increase in FHA approvals in the next few years would be a game changer in the condominium market, and we can only hope to see that happen.

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