If you are planning to buy a Condo in San Jose or other parts of the Bay Area and planning to get an FHA loan keep reading. FHA has made some major changes to their condo guidelines and they go into effect as of Nov 2nd, 2009. Some of the highlights:
- Currently lots of condominium projects in the bay area is approved by FHA. However, any project approved prior to October 1, 2008 loses it's pre-approval and must re-apply.To find a list of approved projects, visit the HUD linkhttps://entp.hud.gov/idapp/html/condlook.cfm. Make sure under approval method pick the option - "HRAP/DELRAP". Thats the new HUD review and approval process.
- Spot approvals, where a project could be approved for an FHA loan even if the entire project was not approved by FHA, is not allowed anymore. And though some lenders will have the authority to do so, because of the enormous liability attached most likely they would refrain from doing it. Which means all project approvals will have to go to FHA directly.
- No more than 30% of the units can have FHA financing
- >50% of the units must be owner-occupied.
- No single entity may own more than 10% of the units in a project
- No more than 15% of owners can be delinquent on their HOA dues.Also, no pending litigation against the HOA, it's officers or directors is allowed.
- The HOA must also provide evidence of the project's appropriate hazard, liability and flood insurance.
- For new constructions, at least 50% of the units in the project must have been sold.
- But in my opinion the deal breaker could be this condition - A current reserve study must be performed to assure the HOA has adequate funds available for the funding of capital expenditure and maintenance. With so many HOAs running into capital reserve issues recently, this condition alone could be the #1 reason why a lot of projects may not get approved.