From Flickr by MileHighUrbanLiving
The Denver Post had a nice teaser reminding all of us in the real estate industry that the Federal Housing Administration (FHA) is still working on its new rules for loans on condos.
The FHA sponsors home loans backed by the US government with the lowest down-payment requirement of 3.5 percent and a lower credit standard than conventional loans.
What Does the FHA Do Now?
Currently, a FHA loan on a condo requires the entire condominium project be on a pre-approved list though spot approvals are done on a loan-by-loan basis. Factors the FHA are looking for are the percentage of owner-occupied condos to rented condos and the percentage of FHA backed loansin a project (I hate to call them projects so also consider condo building or complex).
The Federal Housing Administration Loan Challenge
Part of the concern with the new guidelines are the elimination of the spot approvals, meaning the condo complex must be pre-approved. I had a situation this past year where the closing was delayed a week because the 15 unit project, that didn’t have a professional real estate management company and a home owners’ association (HOA) that ran the show, never even thought of applying to the FHA to be certified. Also, the regulation currently forbids more than 30% of units in a project to have FHA loans.
What the FHA guidelines do is further convolute the market (how would you like to be the seller who can’t sell because your FHA buyer would put the entire community over the 30%?) and can limit the market buyers and seller have available to them.
What can You as the Condo Buyer or Seller Do?
This new guidance is expected to be released in the next couple weeks but if you’re looking to buy or sell a condo, make sure you ask the management company or HOA (your REALTOR can also do this for you) if the community is FHA approved.
