As most home buyers and sellers know, the FHA helps buyers purchase homes. They do this by “insuring” loans on behalf of buyers who might not be able to otherwise afford a conventional loan. As a result, FHA buyers can still get financing with lower credit scores and lower down-payments than a conventional buyer. However, not all real estate properties qualify for an FHA loan.
If a property is a condominium or a townhome, then the real estate must be “approved” or “certified” by the FHA in order to qualify for an FHA loan. The certification process is the FHA’s way of making sure the condominium or townhouse meets certain basic quality standards. There are lots of condominiums and townhomes in Chicago and the surrounding suburbs that are already FHA approved. Some, however, are not.
Before the laws changed in 2010, when a property was not FHA approved, a lender might be able to get the unit a “spot approval” provided it met certain FHA guidelines. In addition, once a property was certified, it stayed certified. Today, in the wake of the “real estate bubble”, the spot approval process no longer exists and FHA certifications now expire and an FHA approval must be renewed every two years.
HUD maintains a website that details approved properties and when their certification is set to expire. Buyers in the market for a condominium or a townhome who want to get an FHA loan would be smart to check the list to make sure the property they want to buy is actually FHA approved!