When lenders begin processing an FHA loan on a condominium managed by an homeowner’s association (HOA), one of the many things they do is send a mortgage (or lender) questionnaire to the HOA. On the questionnaire, the HOA will then have to disclose information like the owner occupancy rate in the community, the HOA’s cash reserves balance, the percentage of owners with delinquent accounts, and the list goes on… Because there is no specified deadline on these questionnaires, this part of the process can often slow down the loan processing, and depending on the answers given by the HOA, can halt the process altogether. Charles Dailey wrote a post on ActiveRain talking about this in greater detail.
What Charles said, and I have seen firsthand, is that this requirement will make condos in homeowner’s associations harder or impossible to qualify for FHA loans. If you are a home buyer, and plan to look at condos, talk to your lender about this, and prepare a plan of action. You may also want to discuss with your Realtor what he/she can do, once you find a condo to write an offer on, to get some of the more important questions answered by the HOA before making an offer on it, or during your inspection period. The eligibility of a condo for FHA financing can change daily, though, so don’t expect anyone to give you a definitive list of communities who are approved for it. You can search here for condominium projects that have been previously approved for FHA financing. It’s a good place to start, but even if a condo is listed as “approved” on this website, your lender will still need to confirm that the project meets the FHA-required criteria right now. If you are the owner of a condominium managed by an HOA, and are looking to sell it, work with your Realtor and your HOA to find out if your subdivision is eligible for FHA financing right now. If it’s not, you can save everyone some time and money by not allowing your home to be marketed to FHA buyers, and not reviewing offers from FHA buyers.