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HUD / FHA Approvals

Why condominium associations should become HUD Condo Approved

For some, there’s still a stigma related with HUD and that is no longer the case. The HUD condo approval has become the benchmark for the real estate industry to identify, in real time, associations that are meeting mortgage requirements.

The HUD approval lasts for three years and sends a signal to the market that the HOA is being run professionally and has little to no issues.

An association that is not approved with HUD cannot offer FHA Mortgages and will experience less traffic as buyers and realtors cannot independently or easily verify if something is wrong with the HOA (e.g. inadequate reserves, pending or on-going special assessments, litigation, high delinquency rates, etc.). More realtors and buyers visit HUD approved properties as more mortgage options increase the likelihood of a completed and successful real estate transaction.

General HUD approval rules of thumb:

  1. 10% of HOA fees must be reserved yearly;
  2. No more than 15% of the association fees can be more than 60 days late;
  3. No more than 50% of the association can be rented or investor owned;
  4. No one person can own more than 10% of the units;
  5. HOA’s with litigation can be approved on a case by case basis but need additional review; and
  6. No more than 25% of the HOA can be used for commercial purposes.

Feel free to contact me with any questions or concerns anytime