There will be changes coming October 1, 2009 for developers of condo projects and existing condo owners who want to get Federal Housing Administration (FHA) approval for financing. The United States Department of Housing and Urban Development (HUD) has announced changes to their Condo Approval Process and elimination of "spot" approvals.
In the past, you only needed to satisfy one of the following two criteria to finance a condo unit using FHA financing. Either (1) the Condo Project has a FHA warranty, which would require the Homeowners Association of the condominium project to apply and receive a warranty on the project from the HUD; or (2) the unit must pass a questionnaire called a “Spot Check” done on an ad hoc basis.
However, the HUD just released an announcement that they will be changing the guidelines which includes the removal of “Spot Check” approvals. Therefore, you will only be able to get a FHA loan on a condo if the project has a warranty. (Mortgage Letter 2009-19).
WHAT THIS MEANS TO YOU IF YOU’RE A CONDO BUYER
Whether you’re looking to buy a condo using FHA financing or not, this should still affect your buying decision. Keep in mind that you do not want to buy a property that will be more difficult sell down the road. However, if you find a condo that does not have a FHA warranty and you really want to buy it, know that October 1st is the date the new guidelines go in affect. Also, many lenders have already adopted this policy prior to the date mentioned, so be sure to check your lender before applying. If you do buy using the “Spot Check” approval now, I would recommend you speak to the homeowners association about making the property FHA warrantable immediately after you close on your purchase.
WHAT THIS MEANS TO YOU IF YOU’RE ALREADY A CONDO OWNER
First, check immediately to see if your condo has a FHA warranty. If it has a FHA warranty, then you are good to go. If it is not a FHA warrantable condo, speak to the Homeowners Association immediately about getting the condo FHA warrantable. The key is to get your condo a FHA warranty prior to the October 1st date. Keep in mind that the turnaround time to get a warranty will be based on the amount of submissions the HUD receives. Everybody will likely flood the process after they realize how important this is.
Today, FHA loans now represent about 25% of all home purchases. Therefore, if you are selling a condo in a complex that does not have a FHA warranty; you are eliminating at least 25% of your potential buyers. Evidence of our current real estate market has shown that when the ability to obtain financing for a property becomes more difficult, the values of the property usually drop. Therefore, this will have a great impact on the condo markets, especially in Austin, since it will be more difficult to obtain loans for your condos.
In the past, you only needed to satisfy one of the following two criteria to finance a condo unit using FHA financing. Either (1) the Condo Project has a FHA warranty, which would require the Homeowners Association of the condominium project to apply and receive a warranty on the project from the HUD; or (2) the unit must pass a questionnaire called a “Spot Check” done on an ad hoc basis.
However, the HUD just released an announcement that they will be changing the guidelines which includes the removal of “Spot Check” approvals. Therefore, you will only be able to get a FHA loan on a condo if the project has a warranty. (Mortgage Letter 2009-19).
WHAT THIS MEANS TO YOU IF YOU’RE A CONDO BUYER
Whether you’re looking to buy a condo using FHA financing or not, this should still affect your buying decision. Keep in mind that you do not want to buy a property that will be more difficult sell down the road. However, if you find a condo that does not have a FHA warranty and you really want to buy it, know that October 1st is the date the new guidelines go in affect. Also, many lenders have already adopted this policy prior to the date mentioned, so be sure to check your lender before applying. If you do buy using the “Spot Check” approval now, I would recommend you speak to the homeowners association about making the property FHA warrantable immediately after you close on your purchase.
WHAT THIS MEANS TO YOU IF YOU’RE ALREADY A CONDO OWNER
First, check immediately to see if your condo has a FHA warranty. If it has a FHA warranty, then you are good to go. If it is not a FHA warrantable condo, speak to the Homeowners Association immediately about getting the condo FHA warrantable. The key is to get your condo a FHA warranty prior to the October 1st date. Keep in mind that the turnaround time to get a warranty will be based on the amount of submissions the HUD receives. Everybody will likely flood the process after they realize how important this is.
Today, FHA loans now represent about 25% of all home purchases. Therefore, if you are selling a condo in a complex that does not have a FHA warranty; you are eliminating at least 25% of your potential buyers. Evidence of our current real estate market has shown that when the ability to obtain financing for a property becomes more difficult, the values of the property usually drop. Therefore, this will have a great impact on the condo markets, especially in Austin, since it will be more difficult to obtain loans for your condos.
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posted by Lorenzana Law Firm, P.C. at
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