Major Changes for FHA Condos

As many of you may know, beginning tomorrow February 1st, 2010, the FHA "Spot Approval" Condominium process will no longer be allowed.  This will affect many buyers who are trying to purchase in condominiums that are not already FHA approved.  As long as the FHA Casefile ID is pulled prior to 2/1/2010, the loan may still close using the FHA Spot Approval process. 

Otherwise, the condominium will now have to be approved by HUD or the DELRAP (DE Lender Review & Approval Process).  This is a more thorough review, that includes either submitting a full package to HUD and / or lender for the full review of project, to determine eligibility.  This also takes approximately 4-6 weeks, whereas the Spot Approval was just a one page questionnaire that the HOA could complete. 

Below is the link that you can review to determine if a condo is currently FHA approved:

https://entp.hud.gov/idapp/html/condlook.cfm

As a result of these major changes, condominium HOA's are encouraged to go ahead and submit the documentation required to HUD, in order to get their community FHA approved.  This will open the door to a number of purchasers (as FHA only requires 3.5% down payment vs. 10% - 20% down payment on conventional) that wouldn't be allowed if not FHA approved.