If you’re considering building a new condo project or perhaps buying an existing one and rehabilitating the property, you need to be aware that when those who buy one of the units and need financing, unless the project has been previously approved by a lender, getting a loan may be tough for buyers.spot approvals However, it’s anticipated that the Federal Housing Administration, or FHA, might soon be changing its tune regarding condo approvals.

Agency lenders approving mortgage loans using Fannie Mae and Freddie Mac guidelines as well as government-backed programs a la VA and FHA can approve a borrower to buy a condo but must also approve the condominium project as a whole. There are various rules that a condo or town home must comply with such as the number of owner occupied units compared to rental units and a host of other guidelines. One of the first things developers should do but do not is getting the project approved during construction or rehabilitation. That way getting financing won’t be such an issue for buyers. Once a project is approved for one borrower, it is approved for future buyers.

Up until a couple of years ago, FHA made allowances for a “spot” approval when a project did not currently have an existing FHA blessing. FHA loans are perfect for first time home buyers because they require only 3.5 percent down and condos are often entry-level purchases. When a condo project applies for FHA approval it can be a lengthy process taking several weeks to wind the approval request through HUD.

However, through no shortage of lobbying efforts, it appears the FHA spot approval process will make a return. The lender can perform a spot approval for a single unit on its own without submitting an entire condo approval request. FHA provides the lender with a checklist of documentation to be included with the loan approval and a lender can complete the requirements within 24 hours. It’s not here yet, but FHA spot approvals appear to be on the horizon.