Tag: HUD

The Feds changed the game.

You now need to be HUD and FHA approved before your condominium community can offer FHA loans to your buyers. Once your complex is approved you must be recertified every 2 years.

If your condo community is not HUD/FHA approved you are missing out on a lot of buyers.

For people who can’t qualify for conventional loans the FHA loan program is the answer.

According to DQ News in April 2011 – 33.4% of the purchase mortgages used in 20 of the largest metro areas were FHA-Insured and the November 2010 Realtors Confidence Index reported that Nationally 39 percent of recent buyers purchased a home with FHA-insured loans.

If your condominium community is not FHA approved you are missing out on a lot of potential buyers. This will also affect current homeowners when they go to sell their unit.

For many first time home buyers qualifying for a conventional loan isnt possible. Through the FHA there are programs that make it feasible for these people to get affordable financing.

The Benefits of the FHA Loan Program

– A low down payment

The FHA program lets buyers put as little as 3.5% of the purchase price down. As you can imagine this opens many doors for people that wouldnt otherwise be able to come up with a conventional down payment.

– Help with closing costs

Qualified applicants can also receive up to 6% towards closing costs. This further reduces the loan and down payment amount.

– Co-Signer requirements

Another part of the program allows for a blood relative to co-sign. What makes this program different is that if the home-buyers dont have enough credit to qualify on their own a blood relative can co-sign without needing to reside in the home that is being purchased.

With the help of those benefits people with little credit, low and moderate incomes and first time home buyers have more opportunities to find affordable housing.

These types of people make up a large part of those buying homes. First time home buyers are usually those that are less qualified for conventional loans. Without being HUD approved your condo community will not be able to provide affordable financing from the FHA.

Recently HUD made drastic changes to their condo approval program. These changes jeopardize the availability of FHA loans for condominiums.

HUD Changes:

– Elimination of spot approvals
– Mandatory recertification for projects approved prior to October 2009
– Re-certification every 2 years

The elimination of spot approval can cause major concern and problems for your condominium community. Spot approvals gave every condo community a way to assist people requiring FHA programs. Loans were decided on an as needed basis.

If you were relying on spot approvals to obtain financing for those homebuyers that need FHA assistance that option is no longer available. You will not be able to get FHA help to purchase a home within your community.

Now full HUD approval is required for anyone wanting to use the FHA loan program.

If your condominiums need to be certified or recertified now is the time to do it. It is anticipated that there will be a boatload of applications to HUD for FHA approval over the next few months so get yours in now. First come – first served.

To see if your condominium complex is HUD/FHA approved go to https://entp.hud.gov/idapp/html/condlook.cfm

To view HUD Mortgagee Letter 2009-46 B regarding condos approval go here http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-46bml.pdf

For a Condominium Project Approval and Processing Guide go here http://portal.hud.gov/hudportal/documents/huddoc?id=11-22mlguide.pdf

Mortgage Insurance for Condominium Units (Section 234(c)) program assists potential homeowners in purchasing a home in a condominium development. The prospective condominium must be the potential homeowner’s primary residence.

The intent of this federal program managed under the U.S. Department of Housing and Urban Development (HUD) is to insure the loan of a borrower who buys a unit in a condominium property. HUD does not directly provide loans to borrowers. Instead, HUD insures loans through FHA-approved lenders. Some of those who take advantage of the program are low- to moderate-income renters who want to buy their unit in order to avoid displacement when their apartment building is converted into condominiums.

Some aspects of the program are as follows:

*Program insures the loan up to 30 years.
*Condominium development must be separated into a minimum of four dwelling units – can be a walk-up, a rowhouse, semi-detached or an elevator structure.
*Loan is made by a certified HUD lender.
*To be eligible, you must prove creditworthiness and meet FHA underwriting criteria.
*Down payment may be as low as 3 percent or less – FHA insurance enables homeowners to finance around 97 percent of the home’s cost through the home loan.
*Some closing fees may be included in the loan, reducing up-front cost.
*FHA limits certain fees charged by lenders – e.g., loan origination fees.
*FHA limits the amount of the home loan based on the locale of the condominium and number of units being bought.

Some restrictions do apply to the program. FHA will not insure loans under this program for rental units converted to ownership except as follows:

*Units were converted over a year prior to loan application.
*Potential borrower or co-borrower was a tenant of one of the converted units.
*Property conversion is sponsored by a tenant’s group that represents the bulk of households in the development – 80 percent of FHA-insured home loans must be for owner-occupants.

In order to get started, you need to find a FHA-approved lender. You may do so by contacting lenders and asking them if they are FHA-approved or by conducting a search on the HUD website. Either way, you’ll want to shop around for a reputable lender with a good interest rate and low closing fees.

Compare rates and fees, and use the following as a checklist to compare lenders:

*How much is the lender charging for the interest rate and origination fees?
*Is the lender approved by FHA for your local area?
*Do you know the lender’s reputation?

Ask plenty of questions and keep the following in mind:

*Interest rate is not regulated and points are not set by the FHA.
*Before signing any agreement, understand that you are responsible for negotiating with your lender regarding the terms set for the loan, to include routine and reasonable closing costs required to close on the loan.

Property developers who intend to finance the construction or renovation of properties they intend to sell as units under this program may also obtain FHA-insured mortgages.

For more information, visit the HUD website or contact your local lender.