FHA Condominium Approval Process
Trying to get your condominium approved can be overwhelming and time consuming. The process requires compiling a lot of paperwork (our submission packages average nearly 300 pages), completing forms, certifying conditions, digitizing everything onto a CD, and sending it to your designated home ownership center. It normally takes our clients about a week to provide us with everything, a few days for us to finalize our underwriting review and package it up, and then the FHA normally takes just under a month to complete their review. You should plan on about a five week period to get approved.
On September 1, 2009 the FHA discontinued “spot approvals” on individual condo units. Now, the entire condominium project must be approved in advance of any FHA insured loan. Each approval is good for 2 years. The following points summarize the condo approval process:
HUD has 2 submission options; the HRAP method and the DELRAP method. Today, HRAP (HUD Review and Approval Process) is the most common method and involves submitting a comprehensive application package of the required information to one of the four HUD regional Home Ownership Centers. Currently about 90% of all applications are made via HRAP submissions. All Florida submissions must be HRAPs. The DELRAP (Direct Endorsement Lender Review and Approval Process) method allows HUD Direct Endorsement Lenders to directly submit applications online using the HUD computer system. Direct Endorsement Lenders are generally the largest mortgage lenders who meet very stringent HUD requirements. American Condo Approvals specializes in HRAP submissions.
The requirements of a submission package depend on the type of condo project. New projects have more extensive requirements than established projects. You can view a breakdown of the different condo types here. HUD requires documentation and certifications that show the complex is normal and free of unusual risk. The requested documentation enables HUD to review the project and assess the overall risk. Most of our submissions are any where from 200 to 400+ pages submitted as a large PDF file.
After a thorough underwriting review and compilation of needed materials, American Condo Approvals puts together a comprehensive submission package that is sent to HUD. HUD provides an official receipt email once the package is logged into their system and normally 2-3 weeks after, a response email is sent with a list of questions and a request for additional materials. Upon receiving a quick and satisfactory response, they then approve the submission. At the present we are seeing approvals made within 21-32 days of HUD’s official receipt of the package.
Upon a decision being made on the submission package, HUD sends an email to us and updates their online condo database. Approved projects are indicated as such with their new approval date and their next expiration date which is 2 years later. This online system is an easy way for prospective buyers, real estate agents and lenders to verify the project is eligible for FHA insured mortgages. Rejected projects have their status change to rejected and may no longer receive any case #s. The only exception is for the refinancing of FHA to FHA loans.
Given it normally takes our clients about a week to get together all of the items they need to provide and that we average getting the packages out in 48 hours, the entire time frame from start to approval ranges from four to six weeks with five weeks as the average. There is no expedited option. The surest way of getting approved quickly is to submit a complete and compliant package.
Through July 11, 2011, of the 6,192 submissions made for approval, only 4,422 received approval, a rate of only 71%. Those not approved either submitted incomplete packages or withdrew their requests after finding out they were not compliant. The FHA provides a 48 hour window to respond to their information requests. If that time frame is not met, the submission is considered rejected. Follow up information received after the 48 hour window is put back into their new submission queue, starting the 30 day window all over. We work hard to make sure this never happens to our clients.