Anyone that has tried to buy a condo knows that if you’re trying to purchase with FHA financing it may limit your choices and can cause great headaches with deals falling through and more frustration than you bargained for.
So why is this the case?
Typically a condo purchase with FHA financing means the development must be FHA approved. There are numerous boxes a lender must select to make sure it is FHA compliant and if not? Either you work with your lender and the Home owner association, which could take months to get it approved or you move on to the next one. Additionally, other types of financing tend to go along with the same guidelines as FHA and if it does not meet FHA standards it may not meet theirs either. So what is a buyer and mostly first time home buyers to do?
There seems to be some good news on the horizon that is getting attention and may help condos get sold instead of sitting vacant and then going back to the bank. Finally, it seems FHA is starting to ease up a bit. On September 13, 2012 FHA implemented some changes that will cause an easing up for prospective home owners and investors. Here are the four main financing changes:
1. The condo to commercial ratio is being relaxed. This means for mixed store/commercial with home units above there can be a mix of 50% commercial. Previously 25%.
Great news in downtown Seattle!
2. Allowance is being made for investors to own ½ the units which is a huge jump up from 10%.
3. Change has been made to the rule on delinquent home owner association dues. Previously it could deny a loan if 15 percent were delinquent 30 days on HOA dues. The change now states 60 days.
4. Condo board certification in regards to liability risks of the condo’s board. Since most boards are made up of home- owners who volunteer, they were reluctant to sign FHA paperwork that could have legal implications if they forgot to add something or checked the wrong box. Now there is some verbiage that FHA recognizes their efforts to verify information. Not sure that will suffice and make members feel relaxed but, at least they are moving in the right direction.
Now I must add that these new rules will not pertain to most individual buyers and mostly will affect areas of resorts and urban developments but, it is very important because it opens the door for more changes in the future. There is talk of loosening the 50% FHA denial if ½ the units were already sold under FHA and they are looking at the owner –occupied guideline.
As an agent I see so many complications with condo/townhomes and as the market is starting to turn more positive, especially here in Snohomish County, it is good to know one of the big players in financing is starting to maybe listen a little bit to move us in the right direction for home-ownership and recovery.
Information taken from The “New York Times”es