It is estimated that 30-40% of all condominium loans now are backed by the FHA. It is very important that your condominium association seek and get approval.
Loans are easier to come by, and rates are better, and the loan is backed by the federal government.
Good deals come with strings attached. The association has to meet many criteria to be approved.
We will deal with the insurance section, and what is required.
You are required to meet the following criteria:
- 100% replacement cost- The association must carry enough insurance to completely rebuild the structure back to it’s original design, layout and appearance at the time of loss ( no unit owner “gap” insurance is eligible).
- General liability insurance- at least $1,000,000 per occurance
- Crime coverage- Fidelity or employee dishonesty coverage covering the association and including naming the property manager as additional insured. ( FHA backs down ) This is for associations with 20 or more units. The amount of coverage to be equal to 3 months assoc. fees and total amount of the reserve funds.
- Certain Flood Zones are not eligible.
- Unit owners must carry 20% of the value of their unit as coverage “A” building coverage on their unit owners homeowners ( HO_6) insurance.
Getting FHA approval is no small feat, but it has it’s benefits. Insurance is only a part of the process, but if you comply with these five steps, you should be on your way to approval.