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What are the pros and cons of FHA certification?

FHA Certification

Since 2010, the FHA has required that entire condominium associations be certified before granting FHA backed loans to home buyers. Prior to 2010, the certification was only required for the individual unit. Condominium associations considering FHA certification must understand the FHA organization and what constitutes eligible projects. Equally important is understanding the truth regarding common FHA misconceptions.

FHA Defined

FHA stands for the Federal Housing Administration. It is the government-owned insurance company that insures home loans for buyers who can’t afford a conventional down payment or who choose to use their funds in other ways. FHA backed loans allows home buyers to purchase a home with a lower down payment and often with a lower interest rate. The lower down payment requirements attract new home buyers.

FHA, Condominium Associations, and Certification

The FHA requires an entire condominium project to be FHA certified before certifying loans. In other words, no single unit is eligible for FHA financing unless the entire condominium community is FHA certified.

Eligible Projects

Ineligible Projects

Certification Representations

When applying for certification, a condominium association must make certain declaration statements relating to certification requirements. These statements must be submitted on company letterhead and are often signed by an attorney. The condominium management team may sign the document themselves, however, it is highly recommended an attorney review it first. An attorney is helpful when reviewing the required FHA guidelines and the association’s application. The declaration document certifies, among other things, that the information submitted in the application is true to the best of the sender’s knowledge. Serious penalties exist for signors who knowingly provide false information. Maximum penalties under federal law regarding this include a possible 30-years imprisonment and a $1 million fine. The penalties for knowingly providing false information underscores the importance of seeking attorney assistance with the certification document.

The Pros and Cons of FHA Certification

For condominium associations considering the FHA certification process, do the pros outweigh the cons? Most industry experts say yes. The biggest hurdle between associations and certification is the misconception that the FHA attracts low-income buyers. This conception is 100% false as the FHA is not associated in any way with affordable housing programs. Another misconception is that the FHA is a lenderwhen in fact, the FHA provides mortgage insurance to banks, credit unions, and other lenders. Here are a few key reasons why industry experts rate FHA certification as a pro-choice:

Two methods exist for the certification process:

The FHA certification process for condominium associations requires strict attention to the guidelines and requirements. Once completed, associations stand a better chance at an increased pool of home buyers and an increase in property values. To better understand FHA certification for condominium associations, contact us today for more information.

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