FHA Relaxing Condo Financing Rules
Condo financing can be tedious.
It is disappointing for home buyers to learn that condo financing is not easy to get. It is also frustrating for us buyers agent because we cannot help these home buyers buy condos.
Case in point: I recently had a buyer that had perfect credit, was well qualified, and put 60% down on his Celebration condo purchase. We were 5 weeks into the transaction before learning that the condo building had co insurance, which triggers a mandatory updated appraisal of the entire condo community.
The condo association did not have it, nor was the condo association willing to get it. Miraculously, the lender convinced the insurance company to amend the insurance policy to remove the co insurance requirement. Hallelujah! Issue resolved!
But then, another issue crept up. There were 4 different fees between HOA and Condo fees, and the buyers appraisal showed inaccurate fees. It took a long 2 weeks before the appraiser was able to confirm what the fees were and correct the appraisal. It finally closed, and the buyer was thrilled!
These condo financing blunders are not unusual, even when buyers are well qualified.
Why is Condo Financing so difficult?
Unlike single family homes and town homes, condo financing requires the lender to review the financial strength of not only the buyer but also the condo itself. The complex must meet current rules for FHA or Conventional loan (Fannie Mae). If the condo community is not on the FHA or Fannie Mae approved list (most are not), it requires the lender to further scrutinize the condo to see if it meets the guidelines.
Condo Financing may be a gamble.
As Buyers Agents, we do research to see if any past condos sales were financed, but ultimately we do not know if the condo will meet FHA or Fannie Mae requirements. Sometimes the information is not available until we are well under contract as seen in the story above. Buyers will need to work closely with their mortgage broker to find the right loan both for them and for the community. Some lenders do not require a condo questionnaire which means less obstacles for buyers. Dealing with difficult loans is the main reason that the buyer needs an experience Florida mortgage broker.
Sometimes, there are condo units for sale that can only be purchased with cash.
Is condo financing getting easier?
Yes and no. Most conventional condo loans are requiring buyers to put down a larger down payment of 25-30% down. While it may be only 5-10% down when buying a single family. FHA is another option with 3.5% down for those that claim the property as a primary residence. Years ago, buyers could not get financing at all no matter how much they have for a down payment.
FHA Heading in the right direction.
Both FHA and Fannie Mae require a certain ratio of primary vs. investor owned in the community for financing. Now FHA is allowing “second homes” to be counted as owner properties and not counted as “investor” properties. This will boost ratios to qualify more condo financing in the market place. In addition, Citizens Insurance will now become accepted under FHA.
Condo Financing is Strategic.
You need strategic partners. A condo purchase can be challenging, you need a strategic mortgage broker to select the right lender and size up quickly the condo community. Plus you need an excellent buyers agent to help you sift and research potential communities you can buy in. Buyers Broker of Florida is the top Buyer Agency in Orlando that specializes in home buying. Ask us your hard questions 407-539-1053