Wednesday, October 7, 2009

Condominium Financing is A Challenge

This post is courtesy of Sally Lapides, Owner and CEO of Residential Properties Ltd.

HUD issued Mortgagee Letter 2009-19 with important changes to the guidelines for Condo financing. The guidelines were originally scheduled to take effect on October 1st, but are now scheduled to take effect November 2nd. One of the major changes has to do with the Approved Condo list. Currently, FHA has a list of Approved Condo’s. If a project is on the approved list then FHA financing is allowed, but only if the project meets the other requirements. Spot Approval provided a way to close FHA loans in projects that were not approved; now, spot approval will no longer be allowed. According to the new guidelines, any project not approved in the past 12 months will be taken off the FHA Condo Approval list and new projects currently approved will have 12 months to re-certify, so basically the entire list of approved condo’s is being redone.

Here are some more proposed guidelines to be mindful of:• 4+ units can have 30% maximum FHA financed units, (which might change to 50%).• No more than 15 % of the units can be in arrears of the condo association fee.• No more than 10% of the units can be owned by a single investor.• 2 and 3 units are now allowed, but HUD will only insure one of the units.• Right of First refusal considered on a case by case basis, (as long as you can prove it is not discriminatory).

Real Estate Insight tip:
If you are thinking about buying a Condo with FHA financing, do yourself a favor and look for HUD approved units. If you are selling a unit that is not HUD approved, understand that the pool of buyers is smaller, and non HUD approved Condos are going down in value, you might have to price below market to compete. If you live in a non-approved building, strongly suggest to your Condo Board that they go about the approval process. To find out if a condo project is FHA approved, click here for the HUD webpage: FHA condo approval search