AGENTS AND PROSPECTIVE BUYERS BEWARE!!!!! URGENT NEWS!!!!!!
You need to pay attention to some recent changes HUD (Department of Urban Housing and Development) is making that affects condominiums.
In the past, you only needed to satisfy one of the following two criteria?s to finance a condo unit using FHA financing.
1.) The Condo Project has a FHA warranty
- This requires the Homeowners Association of the condominium project to apply and receive a warranty on the project from the HUD.
2.) The unit must pass a questionnaire called a ?Spot Check? done on an individual basis
HUD recently released an announcement that they will be changing the guidelines which includes the removal of ?Spot Check? approvals which means you will only be able to get a FHA loan on a condo if the project has a warranty. (Mortgage Letter 2009-19).
FHA loans now represent more than 25% of all home purchases. If you are selling a condo in a complex that does not have a FHA warranty, you are eliminating 25% of the buyers today. As our current real estate market has shown that when the ability to obtain financing for a property becomes more difficult, values drop.
WHAT THIS MEANS TO YOU IF YOU?RE A CONDO BUYER
Whether you?re looking to buy using FHA financing or not, this should still affect your buying decision. You don?t want to buy a property that will be more difficult sell down the road. If you find a condo that does not have a FHA warranty and you really want to buy it, know that October 1st is the date the new guidelines go in affect. Also, many lenders will adopt this policy prior to this date, so be sure to check your lender. If you do buy using the ?Spot Check? approval now, I would recommend you actively speak to the homeowners association about making the property FHA warrantable immediately after you close on your purchase.
WHAT THIS MEANS TO YOU IF YOU?RE A CONDO OWNER
Check immediately to see if your condo has a FHA warranty. If it has a FHA warranty, you?re good! If it is not a FHA warrantable complex, speak to the Homeowners Association immediately about getting the complex FHA warrantable. The key is to get your complex a FHA warranty PRIOR to the October 1st date. Keep in mind that the turn times to get a warranty will be based highly on the amount of submissions HUD receives. Everybody will likely
FHA received a wave of applications and submissions. Try to be ahead of the curve.
IS THIS THE ONLY NEW CHANGE?
I?m happy to say that even though this change could potentially be extremely damaging to condo values, there are some positive changes on the 2009-19 HUD letter.
1.) Direct Endorsement Lenders can approve a project (First Savings Mortgage is a direct endorsement lender)!!!!!
a. This means that a FHA lender can actually do the warranty process for HUD. This is great if your lender is a DE (Direct Endorsement) lender as they can approve the entire project then provide you the financing to close
2.) Site Condominiums will not require a Condominium Project approval
a. Site Condos are single family detached dwellings. These will be looked at almost identically like a standard Single Family Residence to the FHA lender.
3.) Refinancing a condo that?s not warrantable that already has a FHA loan does not require a warranty when refinanced to another FHA lender
4.) No Project Approval is needed for buying a HUD foreclosure condo
What does this mean to existing projects that have FHA approvals currently and the Warranty Insurance?
Projects consisting of three or less units will have no more than 1 encumbered with FHA insurance.
Projects consisting of four or more units will have no more than 30 % of the total units encumbered with FHA insurance.
Please call me with questions. Get your buyers familiar with the changes and closed before the 30th of September if they are buying an FHA condo and before Nov. 30th if they want the $8000 first time home buyers credit.
Gregg Busch
Vice President
First Savings Mortgage Corporation
Direct Line - (703) 883-9580
Fax - (703) 564-4685
Cell - (202) 256-7777
E-mail - gbusch@firstsavings.com
McLean, VA 22102
