Can I get FHA Financing for that Condo?

What is FHA Financing, and Why does it Matter For my Condo?

FHA financing is one of the many types of government sponsored financing. Government sponsored financing works like this: 1) A Bank (like First Natick Savings) UNDERWRITES your loan. That means they examine the borrower, decides if he is credit worthy for a given MORTGAGE PROGRAM, and then give they a stamp of approval. 2) The government (or more accurately, a GSE) agrees to FUND the loan until maturity or sale. I won't go into why banks don't want to hold the loan today, but suffice to say that one of the most generous loans out there is an FHA loan.

 

FHA Financing Often Makes the Numbers Work for First Time Buyers

What makes the FHA loan so generous? You need hardly any money for a down payment, typically just 3.5% (allowing you to mortgage 96.5%)! This is a great way to start your foray into housing and build equity, especially if you don't have a large down payment. It's especially attractive in market moving up, as the the extra leverage works for you.

 

What is special about FHA Financing and Condos?

Condos are called condos because you're part of an ASSOCIATION. When you buy a condo, you're buying the unit, but you're also entering into a SHARED OWNERSHIP of many items according to the association. Typically, roofs, windows, roads, pools, septic systems, sewer lines, even heaters can all be included.

Those items are expensive, and so a Lender needs to look at the health of the association, and not just the credit worthiness of the buyer. This is just smart lending, but it can make FHA financing more tricky for a buyer, because you don't have any control over the association, and so it's basically a "black box" for most people. You can't tell by looking at a condo if the association is good, or bad, or somewhere in the middle. But you can tell if someone has looked before.

Researching Condominium Complex and FHA suitability

There is indeed a good, quick way to see if a condo complex is FHA suitable.

 

FHA Condo Complex Results

 

That link will take you to a page which doesn't work on weekends (got to love Government Websites!!). But when it is working, you can just enter the state and town to get a good view of the condo complexes in a town that have been reviewed for FHA suitability. Here's what you might see:

 

 

Condo Name		Address	Approval Method	Composition of Project		Document Status		FHA	Status	Status Date	Expiration Date
22 OAKLAND STREET CONDO		22 OAKLAND STREET NATICK, MA 01760	HRAP	3 units		Recorded/ Not Uploaded		33.33%	Approved	10/27/2011	10/27/2013
DEERFIELD FOREST CONDOMINIUM		1 WALDEN DRIVE NATICK, MA 01760	DELRAP	Existing project consisting of 334 units		Recorded/ Uploaded		2.69%	Approved	05/28/2010	05/28/2012

 

Now, I've eliminated some columns to get it to fit, but I've left some important ones.  The most important is the "STATUS" field. As you can see, the two I have listed here are approved for FHA financing.  Note the far column, EXPIRATION DATE".  If you have a loan that will seek FHA financing after that date, the FHA will have to "re-examine" the condo complex, and if things have changed, they may change their minds about the suitability of the complex for FHA financing.  So these approvals are not cast in stone - they can and do change, and expire.  Also, note the "Approval Method" column.  HRAP and DELRAP indicate whether or not a condo complex has been approved for all lenders, or whether just specific lenders have FHA approval.  So in some instances, it may make sense to change underwriters to take advantage of their history with a condo complex.

 

Using the FHA Condo Complex Approval Guide

Hopefully, these tips will help those with FHA financing speed up their search of property. Regrettably, some of the best condo deals are going to be the complexes that are carrying more risk - and the risk may disqualify them from FHA financing. So if you want to get FHA financing for your condo, use this website to speed up the process, and stop chasing after property you can't get.

 

 

Do Good Things Today!

Matt Heisler