The FHA is a tease. Yes, I said it. You’re a tease. You tempt buyers by flashing a mere 3.5% down payment and interest rates below 5% (at the time of this writing), but then you go and pull the rug out from under everyone!
The FHA has now decided to tighten lending on condo buildings (not one area specifically, but all condos in general). The guidelines apply to buildings that never went through the full approval process before. There’s a site both real estate agents and lenders can check to see if a building has been previously approved, but this too is a tease as it’s only available from 8am – 9pm M-F (did you know websites needed beauty sleep?). But it’s important if you’re looking at condos and only have 3.5% down to keep this new policy in mind. There are some buildings that we know have previously been approved for “spot approvals,” where the lender at the time got the unit approved, but never went through the motions of approving the entire building. Much easier than now!
So what you need to know:
-The process will take at least 2-3 weeks just to get an approval on the building. That means you still have to wait for an appraisal to be done after that point, and you’ll risk paying for a home inspection in the process.
-A 30 day close is highly unlikely.
-The paperwork collection and process can be quite pricey, several thousands. There are some lenders who will absorb this cost for you during the process.
-If the investor ratio is too high (the building must be at least 51% owner occupied), the project is toast!
Before you get nervous that this will kill your goal of buying a condo, call me. I’m half-way through the process of getting a building in Clarendon approved thanks to Dominic Turano and Laura Pede at Wells Fargo. Wells Fargo is able to turn these around in 5-6 business days from the time they get all of the paperwork they need – they’ve been fantastic!!! If all else fails, they can sometimes do a 5% down payment, so we can try to find a way to work around it!
If you’re interested in finding out if your building is FHA approved – call or email me! We’ll figure out a way to work around the problem without getting your hopes up.