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FHA Condo Approval Process, John Poast

FHA Condo Approval Process, John Poast


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  • 1. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306 FHA Condominium Approval ProcessFull project approval replaced Spot Approval as of December 2009. Every FHA loan for acondominium purchase must have proof of project approval. Getting your listing approved forFHA loans allows many more buyers to be eligible. Some of the advantages of FHA approval are:  3.5% down payment (Conventional loans require 5-20%)  620 minimum credit score (Conventional requires 680 for 5% down)  51% Owner Occupancy (Conventional loans require 70-75% Owners)  First Right of Refusal is no longer a deal-breaker.  50% of the units in the association can be FHA loans (increased from 30%)It is in your best interests to start the project approval process as soon as you list the property.As the listing agent, you are able to get many of the required documents easier than your buyer’slender. The condo association may need time to provide the required submission documents. Anattorney letter is required and that could take a few days. Once you submit everything to HUD ittakes 3-4 weeks for approval. There could be a long closing delay if you wait for your buyer’slender to initiate this process.The following pages list the required documents to get a condominium association approved byHUD for FHA loans. Please note that HUD and FHA guidelines change constantly. This guidewas printed 2/12/2010. Please feel free to contact me if you have questions.I look forward to working with you and your customers.Sincerely,John PoastSenior Vice PresidentChicago Bancorp
  • 2. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306Step 1: Check to see if your condominium is already FHA Approved.Go to the following web address: www.tinyurl.com/BancorpCondoCheckEnter the ZIP code of your condominium and check the results to see if your association is listed. A. If the approval is more than 24 months ago then the association must be approved again. The documents on the following pages are required: B. If the approval is less than 24 months ago then the association must be re-warranted by HUD. The following documents are required and you do not have to resubmit a full package for approval: 1. Condominium Questionnaire 2. Association declarations, budget and by-laws 3. Signed letter from the association stating the percentage of investor units, units with delinquent assessments and ownership concentration (example is enclosed). C. If the association was approved after December 7, 2009, then the only required documents are the Condominium Questionnaire and the Association Letter.Have these documents ready for your buyer’s lender and that is it!Step 2: Get the condominium questionnaire completed.The attached condominium questionnaire asks all of the basic questions that HUD wants toknow. The page after the questionnaire has the answers. Have your seller submit thequestionnaire to the association. This can save a lot of time and it will help you avoid roadblocks.The questionnaire allows you to verify that the association has adequate cash reserves andappropriate levels of delinquent assessments and/or rental units.
  • 3. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306Step 3: Use the page for your type of condominium association and collect therequired documents. Once you have ALL of the documents, mail your approval toHUD:U. S. Department of Housing and Urban DevelopmentDenver Homeownership CenterAttn: Technical Support Branch, 21st Floor * 1670 Broadway * Denver, CO 80202To check status or to get additional assistance on any other HUD/FHA-related matters, pleasecontact: 1-800-Call-FHA (1-800-225-5342) or email the HUD Resource Center athud@custhelp.com.
  • 4. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306 EXISTING CONDOMINIUM CHECKLIST (Project completed more than one year)The following documents must be submitted for condominium approval consideration:♦ Cover Letter - (List all documents enclosed) State requested action; name and location (streetaddress, city, county, state and zip code) of the condominium; description of the project includingtype of structure(s), number of units and common facilities; and name, address and phone numberof a contact person.♦ Location Map - identify location of condominium. (Yahoo! or Google map is acceptable)♦ Recorded project plat, map and/or air lot survey which adequately identifies units.♦ Condominium legal documents - the following exhibits are required:♦ Declaration of Covenants, Conditions and Restrictions – recorded♦ Articles of Incorporation - filed with state♦ By-laws - signed by Homeowners Association (HOA)♦ Attorney’s Opinion Letter stating that all the HOA legal documents have been properlyfiled or recorded and are consistent with legal policies set out in HUD Handbook 4265.1,Change 4, Appendix 24, and comply with all state and local laws. (This is a 38-page documentthat is available on the Internet if you search HUD Handbook 4265.1)♦ Condominium association budget and financial statement including reserves of at least10% of the annual budget to cover maintenance, repair and replacement of the commonelements. (2010 and 2009)♦ Minutes of last two meetings of the homeowners association.♦ Certification (on appropriate company letterhead) from the HOA that the project meets the51% owner occupancy requirement.♦ Month and year completed.
  • 5. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306 CONDOMINIUMS UNDER CONSTRUCTION OR EXISTING LESS THAN 1 YEAR The following documents must be submitted for approval consideration:♦ Cover Letter - (List all documents enclosed) State requested action; name and address (streetaddress, city, county, state and zip code) of the condominium; description of the project includingtype of structure(s), number of units and common facilities; and name, address and phonenumber of a contact person.♦ Location Map - Identify location of condominiums. (Yahoo! or Google map is acceptable)♦ Recorded Project Plat Map and/or Air Lot Survey: which adequately identifies units;complete with engineer’s stamp, date and signature.♦ Developer’s general plan and schedule of development.♦ Condominium legal documents - the following exhibits are required: ♦ Declaration of Covenants, Conditions and Restrictions - recorded ♦ Articles of Incorporation - filed with state ♦ By-laws signed by Homeowners Association (HOA)♦ Attorney’s Opinion Letter: stating that all the HOA legal documents have been properlyfiled or recorded and are consistent with legal policies set out in HUD Handbook 4265.1,Change 4, Appendix 24, and comply with all state and local laws. (This is a 38-page documentthat is available on the Internet if you search HUD Handbook 4265.1)♦ Proposed condominium association budget: including reserves of at least 10% of theannual budget to cover maintenance, repair and replacement of the common elements.♦ Evidence: (on appropriate company letterhead) that an escrow account, surety bond orbank irrevocable letter of credit has been established with a balance equal to 1/x the cost forcompletion of the unfinished common areas.♦ Management agreement or proposed management plan.♦ Minutes of last two meetings of the homeowners association, if applicable.♦ Certification: (on appropriate company letterhead) from the HOA that the project meets the51% owner occupancy requirement.♦ Month and year completed, if applicable.
  • 6. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306THE FOLLOWING THREE PAGES ARE ONLY FOR CONDOMINIUMS THAT USED TO BE RENTAL APARTMENT BUILDINGS CONDOMINIUM CO/VERTED FROM RENTAL HOUSING WITH OPERATING ASSOCIATION (The developer has relinquished control of the association to the homeowners.)Units in a rental project which are to be converted to condominium ownership maynot be insured until the project has been converted over one year. Conversion takesplace when all the legal documents establishing the condominium have been recorded.The one year restriction does not apply to:1) Rental projects in which the conversion was sponsored by a bona fide tenants’ organizationrepresenting a majority of the households in the project. 2) Non-rental properties such as aschool, church, or warehouse converted to condominiums or 3) a unit being sold to a purchaserwho was a tenant in the project at the time of the conversion as evidenced by a fully executedcontract and a rental agreement. Without one of the above restrictions being met, therewill be no consideration given to the project and the package will be returned.The following documents must be submitted for approval consideration from theLender, Homeowners Association (HOA) or management company: 1. Cover letter - (List all documents enclosed) State requested action; name and location (street address, city, county, state and zip code) of condominium; description of the project including type of structure(s), number of units and common facilities; and name, address and phone number of a contact person. 2. Condominium legal documents -the following exhibits are required: ♦ Declaration of Covenants, Conditions and Restrictions - recorded ♦ Articles of Incorporation - filed with state ♦ By-laws - signed by HOA 3. Attorney’s opinion letter stating that all the HOA legal documents have been properly filed or recorded and are consistent with legal policies set forth in HUD Handbook 4265.1, Change 4, Appendix 24, and comply with all state and local laws. (This is a 38- page document that is available on the Internet if you search HUD Handbook 4265.1) 4. Recorded plat, plan, survey or map, including amendments of project.
  • 7. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306 5. Location map - identify location of the condominium. (Yahoo! or Google map is acceptable) 6. Condominium association budget and financial statement including reserves of at least 10% of the annual budget to cover maintenance, repair and replacement of the common elements. (2010 and 2009). 7. Minutes of the last two meetings of the HOA. 8. Management company report - if applicable. 9. Certification (on appropriate company letterhead) from the HOA or management company that the project meets the 51% owner occupancy requirement.Project containing multiple buildings may be phased for marketing purposes only(51% owner occupancy required for each building). HIGH RISE APARTMENTBUILDINGS CANNOT BE PHASED. Additional land or buildings may not be annexedto the condominium project after our initial approval.
  • 8. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306 CONDOMINIUM CONVERTED FROM RENTAL HOUSING WITH NON-OPERATING ASSOCIATION(A Non-Operating Association is when some original units remain unsold and the developer may not have relinquished control of the condominium to the homeowners.)Everything on the previous page for Operating Associations also applies toNon-Operating Associations. In addition: 1. Recorded plat, map and/or air lot survey which adequately identifies units (replaces #4) 2. Management agreement and report- if applicable (replaces #8). 3. Evidence of completion of the project (including the common elements) i.e. final municipal approval and occupancy certification.
  • 9. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306 VETERANS AFFAIRS (VA) - CONDOMINIUM RECIPROCITY Your condominium might have previously been approved by VA for a VA loan. The following documents must be submitted to HUD for FHA approval based on previously submitted VA documents:♦ VA’s letter of approval or a copy of VA’s computer printout.♦ Certification (on appropriate company letterhead) from the HOA or directendorsement lender that the project meets the 51% owner occupancy requirement.♦ Condominium association budget and financial statement includingreserves of at least 10% of the annual budget to cover maintenance, repair andreplacement of the common elements. (2010 and 2009).♦ Location map - identify location of the condominium. (Yahoo! or Google map isOK)♦ Street address, city, county, state and zip code of the property.Note: Even though FHA accepts VA’s approval of the condominium project, bystatute, FHA is required to perform an environmental assessment of the project.This additional requirement does add extra time to the approval process.
  • 10. John Poast 300 N. Elizabeth St., Floor 3E Senior Vice President Chicago, IL 60607 jpoast@chicagobancorp.com Ph: (312) 738 - 6242 NMLS#: 217402 Fax: (312) 491 - 5306SAMPLE CO/DOMI/IUM RECERTIFICATIO/ LETTER:DATE:RE: FHA Approved Condominium Project #XXX, AKA (Property Address), withapproval expiring XX/XX/20XX.To Whom It May Concern,This correspondence is to verify that no more than 10% of the units within this X-unit complex are owned by one investor, that no more than 15% of owners are inarrears for condominium association fees and that the project has at least a 50%owner occupancy rate.Sincerely,Name and Title
  • 11. John Poast 300 N. Elizabeth St., Floor 3ESenior Vice President Chicago, IL 60607jpoast@chicagobancorp.com Ph: (312) 738 - 6242NMLS#: 217402 Fax: (312) 491 - 5306