NEW FHA GUIDLINES COULD IMPACT
YOUR ABILITY TO SELL YOUR CONDO!
Did you know that 25% of all home sales in the U.S. involves FHA loans? It may be easy to see that this is really important information for condo owners who hope to maximize their potential pool of buyers. But this is really important information for your condo association too. Read on to see why.
This writer has found from his own research that most major lenders will not provide a loan for a condo without at least 15% (and usually 20%) down; way out of the range for many people in today's economic climate.
The only exception to this requirement that I could find is the FHA loan which only requires 3.5% down. Condo complexes must meet specific critera set down from Housing and Urban Development (HUD) to qualify as an FHA approved complex. The HUD website has a list of approved condo complexes.
As of February 1, 2010, new criteria must be met for condo complexes to get on this approved list, allowing potential buyers to qualify for the 3.5% financing. By the way, loan officers tend see the ability to meet these criteria as reflecting on the soundness of the Association and it's financial stability; possibly making the task of approving condo loans much easier for their underwritiers. So many potential buyers and loan officers might interpret being "FHA Approved" as meaning that a Condo Association, in general, is healthy and viable.
The following is a description of the criteria that must be met for FHA approval:
1. For new construction 70% of the units must be pre-sold.
2. No more than 15% of units can be more than 30 days delinquent in condo fees.
3. Fidelity insurance is required for condos with 20 or more units.
4. Borrowers must obtain condo unit owners insurance unless the master policy provides for interior unit coverage. Coverage may not be for less than 20% of assessed value of the property.
5. No more than 10% of a project can be owned by a single entity.
6. No more than 20% of a project can consist of non-residential space.
7. Condo Associations must have at least 10% of it's budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.
Check with your Association lawyer for a more complete interpretation of this information as well has how it could impact your Association.
