CONDOS ARE ALMOST IMPOSSIBLE TO GET FHA FINANCING FOR
This article came to me from Dan Dobbs who is a sharp broker. The following reasons are why i don’t buy condos unless they is owner financing forever or subject to.
“In 2009, FHA made changes to the rules pertaining to qualifying for FHA financing for the purchase or refinance of a condominium.
These 3 rules most negatively affect buyers who want to buy condos with an FHA-mortgage:
•“Spot approvals” were eliminated, and now the entire project must have an FHA approval before a borrower can get an FHA loan.
•A maximum of 30% of the condo project’s units can have FHA insured mortgages (there was no such limitation previously).
•Small Micro projects
No more than 10% of units can be owned by any one owner. So if the project has only 9 units, it can’t qualify!
After 2009, most condo projects let their approvals lapse .
Getting “FHA-approved” now requires more specific documentation, and can vary depending on the age and ownership of the project.
Project approvals can take as little as two weeks and as long as three months (or more).
Note: Getting a project FHA-approved is NEVER the buyer’s responsibility.
A condo association or management company will need to either initiate, or work with a third party to collect all the documentation for submission and review.
Often listing agents don’t know the HOA status or simply won’t disclose because the HOAs simply don’t cooperate.
5 More Reasons why Condominiums DO NOT Qualify
1) More than 50% of Occupants are Renters
As condo prices dropped, investors were attracted . A flood of all cash buyers and caused the ownership percentages of many condo projects to fall below 50%.
2.More than 14. 9% of HOA dues are delinquent
3.The project is under-insured
Project insurance is probably the easiest to overcome
4.The HOA has limited cash reserves (less than 6% of the annual operating budget)
* HOA monthly delinquencies are the primary factor why projects having limited cash reserves.
5. Litigation against or by the HOA
Two types of litigation will prevent an approval.
Any litigation against contractors for shoddy workmanship is a deal killer!
If a homeowner is suing the HOA for any damages to their unit this also a deal killer.”
