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I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.
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.
That being the case, lets find out what are the FHA requirements for approving a condo project:
- 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.
So what does all this mean if you are a buyer or a seller:
- Longer Escrow period – To get all documents collected from HOA and then get it processed from FHA could easily take 4-6 weeks. Meaning the total escrow period could well be 60-90 days.
- Projects which can no longer be approved may see less buyer activity as FHA is main source of financing for most of the First Time Home Buyers who buy condos at this time.
Make sure the lender who you are working with is up-to-date with all these changes and then some.
Other related posts:
- 96On 10/21 FHA via it's mortgagee letter announced delay in FHA condominium changes. This is what the letter mentioned: Implementation of FHA new policy guidance for condominium project approval and condo unit financing will be delayed until December 7th 2009. The new guidance, to be issued within the next two…
- 88This update contains the temporary changes to the FHA Condo Approval Process for San Jose and rest of the Bay Area as outlined in Mortgage Letter 2009-46 B. Here are the 6 things you need to know about these changes: 1. These temporary changes are effective on December 7th, 2009…
- 77Beginning on Thursday, July 30, 2009, the Truth in Lending Act requirements regarding initial and final disclosures to borrowers, the timing of when fees can be charged and when closings may occur will become effective. These new regulations lengthen the time needed to close loans in order to ensure that…
- 74Federal Housing Administration (FHA), which insures lenders against losses on home mortgages, announced a series of changes that will have far-reaching impact on the housing market of San Jose, the entire San Francisco Bay Area and rest of the country. Background - The agency confirmed that, as of Sept. 30,…
- 69FHA Loan vs Conventional Loan - which one is better? I was speaking at an FHA seminar for real estate agents in Fremont, CA recently. The topic was "How FHA loans are playing a big part in qualifying more First Time Home Buyers". At the end of the presentation, I…