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FHA Approval Fact Sheet

The Busch Team, local lender in the DC Metro Area, NW DC (DuPont, Logan, Georgetown)

F.H.A. CONDOMINIUM PROJECT APPROVAL FACT SHEET

(As of December 7, 2009)

1) FHA requires that the condominium legal documents be fully recorded. However, we can submit with unrecorded documents that must be in their final form and ready for recording. The documents must be fully executed and notarized. Please note that while FHA will accept unrecorded documents for initial submission they will not insure any closed loans in a project until such time as the fully recorded documents have been provided. Condo conversions that are conversions from prior residential use (i.e. apartments) will require that the condominium legal documents be recorded at the time we submit for project approval.

2) A 10-year limited structural warranty plan may be required in order to offer maximum financing (LTV's > 90%) on ground-up new construction projects. The 10 year warranty may be waived in cases where the local jurisdiction performs a minimum of 3 inspections during construction (foundation, framing and final) and a Building Permit and CO have been provided to the lender at closing. A 10-year warranty is not required for condo conversions (gut or non-gut) or for Existing condominiums (over one year old). At the minimum the builder is required to warrant against defects in workmanship on units for at least one year after closing. HUD Form 92544, Builders Warranty will be required for submission and for each loan package.

3) For any ground up new construction condominium project that is located in a FEMA designated 100-year flood plain HUD will require a Letter of Map Revision (LOMR) from FEMA. Absent a LOMR FHA will require an Elevation Certificate showing that the lowest flood elevation is above the FEMA base flood elevation. In these cases the project is still technically in a flood plain and the condominium’s master insurance policy will be required to carry appropriate flood insurance.

4) The condominium budget must include a line item expense for replacement reserves for replacement of major capital items (i.e. roofs, paving, common area HVAC, carpeting, pool equipment, etc...). The amount of reserve funding must be for at least 10% of the annual budget.

5) The condominium legal documents must comply with all state & local laws.

NOTE: FHA will permit a Right of First Refusal as long as the provisions outlined do not violate any discriminatory conduct as detailed in 24 CFR 100 of the Fair Housing Act.

6) FHA will require that 50% of the units in the project (OR subject LEGAL PHASE if phased) be under contract or closed to owner occupant purchasers. It will be up to the lender to certify to the owner occupancy / presale requirement at the time a closed loan is submitted for insurance endorsement.

NOTE: FHA has temporarily reduced the presale from 50% to 30% effective with case #’s issued after December 7, 2009. This reduction is valid through December 31, 2010 at which time FHA will re-evaluate their position.

7) For projects where construction of the project has progressed beyond the stage where HUD can have any influence over remaining uncompleted construction they will not be required to perform an environmental site review / field inspection. However a Phase 1 environmental site assessment is still required in order to confirm that there are no adverse environmental conditions associated with the site. The Phase 1 ESA is required for both ground up new construction and all conversions.

8) No more than 25% of the total floor area in a project can be used for commercial purposes. The commercial space must be of a nature that is homogenous with residential use and is free of adverse conditions to the occupants of the condominium.

9) No more than 10% of the units may be owned by any single investor. This includes the developer / builder who rents out unsold/vacant inventory units.

10) No more than 15% of the total units in the project can be in arrears (more than 30 days past due) on condo association fee payments.

11) Projects consisting of 4+ units will be limited to a maximum of 30% of the project encumbered with FHA financing. Projects consisting of 3 or less units will be limited to one (1) unit encumbered with FHA financing.

NOTE: FHA has temporarily increased the limit for 4+ unit projects to 50% effective with case #’s issued after December 7, 2009.This increase is valid through December 31, 2010 at which time FHA will re-evaluate their position.

The Busch Team, local lender in the DC Metro Area, NW DC (DuPont, Logan, Georgetown)

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