Recently a home buyer wanted to buy a condominium for his family near his work. He had his pre-approval letter, good credit, and a large down payment. Normally this would be an easy deal. He wanted to buy a condominium near Greenway Plaza. There were 28 condos for sale from 14 different Associations. A quick look at approved condo projects for the area showed only two condominium projects were approved by the FHA. “Unfortunately, no units were listed for sale from the approved condominiums and I lost the deal”, says inner loop realtor Bill Edge.
The easy solution would be to get a bank loan right? Every realtor get calls from banks saying we are now doing condominium loans. The problem is that in reality if the FHA isn’t going to make the loan neither is the bank. The bank will tell you there are too many investors in the project, or the management company has not put enough money aside to cover repairs.
The major barrier today is that at least half the units have to be owner occupied. If owners are forced to sale for cash then the buyer is most likely going to be an investor. So the FHA is in fact causing the ratio of owner to investors to increase on the investor side. Another problem is that the FHA still has a 50 percent FHA financing limit. The FHA will not loan money to buyers if more than 50 percent of the owners are currently using FHA financing. This is further complicated by the fact the FHA is the major lender for all but the high end condominium projects.
What may be helpful to Houston is that condos in projects that have 50 percent of their space in commercial use may be approved for FHA loans. This is up from 25 percent last year.
There were four major changes in financing FHA loans
- Condominiums in projects that have 50 percent of their space in commercial use may be approved for FHA loans.
- Single inventors may buy up to 50 percent of the units.
- The FHA will okay loans in which 15 percent of the homeowners are 60 days late on their FHA dues.
- Boards only have to have a good faith effort to verify condo information.
The FHA may make future changes to allow buyers to use FHA financing for condos. The National Association of Realtors believes the rules relating to half the units being owner occupied, and the 50 percent financing rule could change early next year.
Remember, we are here to help buyers and sellers. Consider us your real estate source in Texas. Call Inner Loop Houston Realtor Bill Edge at 713-240-2949 to see Houston Homes in 24 hours or less.
Source: Washington Post, September 21, 2012