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.
Metro Mortgage Company is a federally regulated Mortgage Banker specializing in residential Florida mortgages including Conventional, Jumbo and FHA/VA loans. Visit our home loan approval process page for more information or call us today at 888-617-3674.
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Follow-up RSS Comments Feed or Leave a Trackback[...] New FHA Rule Regarding Condominium Financing | Southwest Florida Blog www.findsouthwestfloridahomes.com/blog/new-fha-rule-regarding-condominium-financing – view page – cached New FHA Rule Regarding Condominium Financing, Florida Real Estate and Mortgage Loan Information., New FHA Rule Set To Take Effect That Will Make It More Difficult To Obtain Condominium Financing. — From the page [...]
It has become almost impossible to finance Condo’s on the beach. Even conventional loans are hard or next to impossible to get. I have had well qualified buyers [800+ credit scores] that have not been able to find any lender willing to lend on a Condo that has not been designated by Fannie as approved. Several of my cash buyers have withdrawn from the market on fear of not being able to sell the condo in the future outside of owner financed option. Even with all the short sales and deals no one can buy. Go figure.
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