Why Obtain FHA Approval For Your Development?
Until recently, spot approval enabled an FHA loan for a single condominium or townhome unit to be possible even if the entire development was not FHA approved.
FHA eliminated spot approval on February 1, 2010. Now an entire condominium development must apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.
In 2006 FHA loans accounted for less than 2% of the mortgage market; now almost half of all new loans are FHA. With 87 percent of home buyers indicating that they plan to use FHA loans, condominium and townhome associations that are not FHA approved are missing out on a significant pool of prospective buyers.
Many buyers today can only purchase with an FHA loan because of the lower down payment requirements (see below). First-time homebuyers make up a significant segment of the condo and townhome market. These buyers are most likely shut out of the market without FHA approval.
With a bigger pool of buyers, units will sell faster and command higher prices due to the law of supply and demand. Higher sale prices mean higher appraised values for all units in the development (because of comps).
Without FHA approval, units for sale can remain on the market for an inordinate amount of time and sell for below-market prices due to reduced demand. Lower sale prices = lower appraised values for all units in a development (because of comps).