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Benefits of FHA

What is FHA?

Federal Housing Administration "FHA" is a government-owned insurance company that insures home loans for buyers.  FHA mortgage insurance is a policy that protects lenders against some or most of losses on a mortgage if the Buyer defaults on the mortgage.

Does the Board have a duty to ensure the condominium is FHA Approved?

Currently, arguments are being made on both sides of the issue. On the one hand, boards have a duty to act in the best interest of their communities and to preserve and protect property values.  Arguably, if a board does not, at least, attempt to get its community certified, one might argue such failure is a breach of that duty.  There has even been situations in which an owner in a condominium accused the board of causing discrimination and hardship based on the Board's refusal to obtain FHA Condomninium Approval.

Why should my Condominium care about the FHA Approval?

This is an issue of interest for the Condominium as FHA-insured Mortgage are playing an increasingly important role as a financial mechanism for those seeking to purchase / refinance or do a reverse mortgage for Condominium Units. 


While traditionally, FHA Played a small role in the housing market (Approx. 20% percent in 2007), that number has increased significantly and recently was estimated to be 70% to 80% of all Condominium Mortgages.  With just allowing Conventional financing the condominiums limiting themselves to 5% of the market - Investors and 15% in house conventional.


Because FHA insured loans are backed by the Federal Governments, the lender's risk of loss associated with granting such a loan is minimized.  As a result of this reduced risk, lenders can offer borrowers of FHA insured loans lower interest rates and lower mortgage insurance based on down payments. The foreclosed rate of FHA backed loans have been shown to be less than a non-FHA backed loans.

Additonally, many lending institutions may underwrite non-FHA loans to FHA Standards.  (Fannie Mae & Freddie Mac-Federal Convental loan programs)

CONCLUSION: There's no doubt about it!  FHA Certification benefits Condominium by increasing the buying pool, which in turn drives up sales prices, unit sales, and increasing the value of units in the Condominium.

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