Spot approvals for FHA loans are said to be cut in October, however investors have to buy the loan, then sell back to FHA. Therefore, investors may cut spot approvals sooner than October 1st. One of our preferred lenders has done several for us, and has recommended that if anyone is looking to make a purchase using a spot approval, it would be wise to do so sooner than later. Although buyers will be able to still get FHA loans on FHA approved properties, options will be extremely limited considering many of the older buildings downtown still have not yet been approved. Currently, the following FHA Spot Approval Guidelines must be met:
- The legal documents of the homeowners association do not contain a right of first refusal or restrictive covenant.
- The unit is part of a condominium regime that provides for common and undivided ownership of common areas by unit owners.
- The project, including the common elements, and those of any Master Association, are complete and the project is not subject to additional phasing or annexation.
- (a) There are no special assessments pending.
(b) No legal action is pending against the condominium association, or its officers or directors.
- The common areas have been under the control of the homeowners association for at least one year.
- At least 90% of the total units in the project have been sold.
- At least 51% of the total units in the project are owner-occupied.
- There are no adverse environmental factors affecting the project as a whole or individual units.
- No single entity owns more than 10% of the total units in the project.
- The units in the project are owned in fee simple or the units are held under a leasehold acceptable to FHA.
- The homeowners association has adequate common area insurance coverage. General liability, replacement coverage, etc., reflect the character, amenities and risks of the particular development. Flood and other insurances should be carried when applicable.
- General maintenance level of common elements is acceptable and there is no deferred maintenance, based on the comments by the Appraiser and/or the pictures.
- The homeowners association has a reserve plan and a reserve fund, separate from the operating account, that is adequate to prevent deferred maintenance.
- (a) For projects consisting of over 30 units, no more than 10% of the total units are encumbered by FHA insured mortgages.
(b) For projects consisting of 30 units or less, no more than 20 percent of the total units are encumbered by FHA insured mortgages.
Developers now apply for FHA approval of the entire project during development, but with the lack of supply Seattle is expected to have, getting a FHA loan can be more difficult come the final quarter of the year if you’re seeking a unit in a building that has yet to get approval. Contact us for more information.