How Long Does it Take to Obtain an FHA Condo Approval?

How Long Does it Take to Obtain an FHA Condo Approval?

Although I receive this question almost on a daily basis, I haven’t taken the time to write it all down.  Scott Godzyk’s article How LONG will it take a home to SELL if it is listed today? inspired me to commit my response to writing.

As with Scott’s answer in his article, my answer to “How long does it take to obtain an FHA condo approval?” is the lackluster: “It depends”.

I know that nobody wants to hear that answer but providing the range of 3 weeks to 2 1/2 years sounds even worse.

The “it depends” answer really means “it depends on how long it takes to receive the paperwork and if there are any issues that are uncovered.”

I have worked with property managers who respond almost immediately to documents requests.  Others have taken weeks to complete questionnaires.  If I haven’t previously worked with the property manager, I don’t know on which end of the spectrum he or she will be.

Once we do receive the paperwork, it only takes a couple of days to review it and is dependent upon how many files we have received that day.  We review the language in the legal documents, the financials, insurance and management agreement.  If everything checks out, the file is completed, compiled and sent to FHA for review. 

FHA's Philadelphia Home Ownership Center

FHA says to allow up to 30 days for processing once it is logged, which takes a couple of days.  The logging procedure is entering the package into their system and randomly assigning a project reviewer to process it.  Current typical FHA processing times is 2-3 weeks and depends on the incoming volume of applications and to which HOC (Home Ownership Center) the file is sent.

If the file is incomplete or if FHA requests more information, the file will be Rejected (there is no file status between “Approved” and “Rejected”).  Further information or documentation is provided and the file goes back in queue for another 2-3 weeks, unless it was something very simple to fix.

So, I typically tell inquiries that most commonly, the process takes 6-8 weeks.

Can it be quicker than this?  Absolutely.  Uncomplicated files where the documents are provided immediately have a good shot at getting approved in 4-5 weeks.

Can they take longer than 8 weeks?  Absolutely.  Here are some reasons why files can take longer:

·        Part of the project is in a Special Flood Hazard Area and the association does not wish to obtain flood insurance.  In these cases, we can try to obtain an Elevation Certificate and submit an application for a Letter of Map Amendment to FEMA to remove the requirement for flood insurance.  This can add 2-3 months.

·        There is language in the legal documents that is not allowed by FHA.  Most typically, this is leasing restriction language.  An amendment would have to be filed on the land records.  This could be a simple process involving only a vote of the Board of Directors or it may have to go through the process of notifying mortgagees and a vote of the unit owners.  This can add a few weeks to potentially a year or more.

·        Inadequate insurance for either hazard or employee dishonesty could take a couple of days to a few months to be increased to meet FHA’s standards.

·        Inadequate reserve fund balance or financial position could take months to a year or more to rectify.  I have been working with a couple of associations since 2011 that have been struggling with this.

·        An outstanding loan to an HOA requires a payment history from the lender.  This could add a couple of extra weeks to the timeline.

So, how long does it take to get an FHA condo approval?

For more cut-and-dry applications, we can turn them around in about 30 days.

The typical file (which would include a pending special assessment, outstanding loan and/or pending litigation) takes roughly 6-8 weeks. 

For the troubled files…well, let’s just say that they should be pleased that we don’t bill by the hour!

Clock image courtesy of stockimages/freedigitalphotos.net

Flood image courtesy of nattavut/freedigitalphotos.net

Graph image courtesy of Stuart Miles/freedigitalphotos.net