Pros and Cons of FHA Certification

J.P. from New Haven County, Connecticut writes:

Dear Mister Condo,

What are the advantages and disadvantages to a condo complex for being FHA certified?

Mister Condo replies:

J.P., back when mortgage monies were freely available from most banks and lending institutions, FHA certification was rarely discussed among condominium associations. Now that the banking industry has seen a tremendous amount of failures, due in part to poor mortgage lending practices, FHA certification for condominiums is widely discussed. The reason is simple. FHA insures the monies that the lenders offer for mortgages but only if the properties they mortgage are FHA certified. FHA is the single largest insurer of mortgages in the country.

The primary advantage of FHA certification to a condominium association is that it allows buyers and sellers far more financial options and flexibility when it comes to obtaining mortgage or loans for refinancing. Quite frankly, it can be the difference between success and failure when it comes to the likelihood of individual unit owners being able to sell or refinance their individual units. There are several advantages to the individual unit owner as well but that really doesn’t factor into whether or not the association should seek certification.

The primary disadvantage of FHA certification is the paperwork and the due diligence that must be performed by the condominium association to achieve and maintain certification. The rules have changed greatly in the past few years, causing confusion and frustration to many condominium associations. There are third-party firms who will handle the certification but that can come with a cost which may be a detriment to the condominium.

Those are just a few of the pros and cons of FHA certification. I trust your condo association will strongly consider the big picture when they decide whether or not to pursue or maintain their certification.