FHA Financing and Condos: What agents and buyers need to know

| Thursday, September 25th, 2014 | No Comments »

FHA details for condo buyersIf you have a buyer who wants to purchase a condo, the first step is to find out what kind of financing they are getting. Not every agent asks; if you don’t, you could find yourself spinning your wheels if your buyer is getting an FHA loan and you are showing them condos that aren’t FHA approved. Don’t worry, I had to find out the hard way too!

FHA loans are not bad loans for people with bad credit. They are simply an option in the world of financing, and are most popular with people who don’t have a lot of money for a down payment (FHA only requires 3.5% down), or for people who have a blip on their credit history (short sale, bankruptcy, foreclosure).  These are government-backed loans so there are certain criteria and a condo complex will only be approved once certain criteria are  met.

You will find that many (I might even go as far as to say most) listing agents don’t know much when it comes to a complex being FHA approved. It’s best to go straight to the Home Owners Association or the management company and ask. You can also check the status of a complex by going to the HUD website. Entering the state and complex name is sufficient but the condo name needs to be an exact spelling. An easy way to verify this is to check the public or tax record for the correct spelling. Again, many times listing agents misspell the name of the complex or put in a space where it shouldn’t be.  For example, I was searching Park View East when it should have been Parkview East.

If you find a complex is approved, check the date that the approval expires. Even if it expires in a few weeks, a lender should still be able to push it through. If it’s not approved, find out why. Most of the time it’s because nobody wants to go through the hassle (think government and lots of paperwork!). There are people who can do this for you, and it takes only a few weeks and a few hundred dollars which the buyer, lender or agents can pay. If it’s not approvable then move on! The most common reasons FHA won’t approve it are: too many delinquent HOA dues, too many rentals or low reserves.

If you know what to look for it can be much easier to help a buyer purchase a condo with an FHA loan. You will avoid a lot of frustration and it will make for a happy agent and buyer!

 

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