Federal Housing Authority (FHA)

Federal Housing Authority(FHA)

The downtrodden economy has wreaked havoc with potential and current property owners; loans are more difficult than ever to obtain and prospective buyers and sellers are suffering. The majority of individual buyers are opting for FHA loan approval in order to obtain a lower down payment in comparison to the percentage currently required for conventional loans.

However, some of the FHA's new requirements have been viewed as major roadblocks and are stricter than ever. To expedite the loan process for individual buyers, associations are being encouraged to obtain FHA approval in advance. With guidance and the right assistance, this can be a smooth process and viewed as beneficial for everyone involved.

Background and the Current Face of the FHA Loan Recipient

The FHA has been a veritable beehive of policy change over the past year, beginning with changes to the approval process that went into effect on February 1, 2010. Essentially, if one is trying to buy or refinance using an FHA loan, the borrower needs to be sure the project is on the FHA's approved list, or be prepared to deal with delays. Prior to the change, units using FHA financing could be FHA-approved on a unit-by-unit basis or "spot approval" process by lenders. The spot approval option is no longer available, and financing with the FHA is only possible if the entire association is FHA-approved. Associations should be aware that FHA loans account for nearly 35 percent of all home mortgages, according to the FHA, and within the next few years it is predicted that 75 percent of all loans will be financed in the same way. These loans obviously no longer have the stigma attached that was once reserved for low-income housing and those with poor credit scores.

Reserve Funding

One of the new guidelines requires that 10% of your association's income be set aside to fund your reserve account. This is a change from how most associations fund their reserves. Your property manager will be talking to your association while we here at RMS are completing your 2011 budgets.

Why Associations Should Begin the Approval Process

With the new restrictions, the number of prospective buyers will be significantly reduced without the ability to secure FHA financing. Obtaining FHA approval as an association could greatly speed up the process for the buyer, and accelerate the sales process. Associations are encouraged not to think of the new FHA requirements as a hindrance, but as a sought-after seal of approval. There are benefits that can be gained from obtaining FHA approved status, and that's good news for everyone. Contact Rosen Management Services to talk to a property manager and learn more about this process if you live in Chicago area.

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