New FHA Rule Regarding Condominium Financing
Posted by Benjamin Dona on Sunday, September 27th, 2009 at 4:00pm.
We wrote a blog post a while back about how if you are purchasing a condo in Florida, mortgage financing is tougher than ever before. Well, it just got even harder to get condo financing, thanks to a new rule set to take effect on November 1, 2009.
The new rule will put an end to "spot approvals" for condo complexes and thus make it harder for buyers to qualify for these types of property loans. The rule disallows FHA underwriter's ability to approve individual condo units rather than an entire condo complex. The reason spot approvals were originally granted was because of the costs and paperwork involved for a condominium association to get an entire complex approved by the FHA is outrageous, costing tens of thousands of dollars for things like appraisals, structural engineering reports, audited financial reports etc. Spot approvals only required a condo or HOA representative to spend about 15 minutes filling out a one page questionaire.
FHA loans are prized by buyers (especially first time buyers) because they generally have lower interest rates and require much lower down payments versus conventional loans (3.5% down payment for FHA loans compared to 25% to 30% down for some Fannie/Freddie condo loans). Now, with spot approvals being discontinued, condo buyers will not be able to get an FHA loan for units in a non-approved building and will have to rely on conventional financing loans or pay cash.
It is amazing to us that the morons in Washington (both in Congress and at HUD) don't recognize that such ridiculous rules are helping to perpetuate the housing crisis. Even Mr. Housing Wizard himself, Rep. Barney Frank, has acknowledged that some of the new rules Fannie and Freddie (and now FHA) have put into effect regarding condominium financing, are entirely too onerous for many qualified buyers to have to deal with.
You can check the HUD Website to determine whether or not a condominium complex is currently on HUD's approved list.
And so, the beat goes on within the mortgage industry.
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About the Author
Benjamin Dona is the Broker and Owner of Gulf Coast Associates, Realtors in Bonita Springs, Florida. He holds two advanced degrees, an MBA and an MA, and has an extensive background in both business and marketing. In 1998, he founded Gulf Coast Associates, and formed a group of like-minded Realtor® associates dedicated to offering professional Southwest Florida real estate services by concentrating on information, education and the use of leading edge technologies. He also is a recognized expert on the "Net," a much-quoted and read blog author, and a contributor to both national and international news outlets. Benjamin is a member of the National Association of Realtors, the Florida Association of Realtors, and numerous local real estate boards throughout Southwest Florida.
Contact Benjamin Dona at 239-948-3955
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