FHA Condo Loans Get “More” Complicated

February 2nd, 2010

It used to be simple to get an FHA condo loan. Lenders could do an FHA “Spot Condo Approval”, which meant that the condo did not need to be on the FHA Approved Condo List, and all we lenders needed to do was verify that the condo met certain FHA requirements (51% owner occupancy, no litigation against the condo, no more than 10% of the unit owners behind in their condo fees, etc). Now the condo approval process is more centralized, and more complicated.

There will be two methods of FHA condo approval:

1. HUD Review and Approval Process (HRAP). This means you have to have FHA approve the condo. Nightmare.

2. Direct Endorsement Lender Review and Approval Process (DELRAP). This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects. So you have to deal with a lender who has their DE, and knows what they are doing.

I will spare you what goes into an FHA condo approval, whether it is being done through FHA or a lender with their DE. The guidelines are 21 mind numbing pages long, so suffice it to say that it will be complicated, and extra time will need to be allowed for FHA financing to get through the approval process. It is not to be feared or avoided, but all parties need to know it will be complicated and require more time.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.​

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