While potential condo buyers aren’t on pins and needles waiting to hear from HUD like we would be for who wins an election, still, buyers would love to know the direction HUD will go with FHA loans and condos. Current loan guidelines for buying condos with FHA loans are tough. The condominium project must be pre-approved by HUD to use an FHA loan. Then during the loan process, the condo project is re-certified; meaning, the criteria needed to get pre-approved is double checked to make sure the condo is still within the guidelines for its pre-approval.
Basically, buying a condo with an FHA loan is a lot of work. The condo homeowner association (HOA) must go through the hoops to get the complex approved for an FHA loan. Most HOAs don’t want to deal with the burden. Then repeat the process for the loan itself – twice the work for the same payout. Hopefully this will change soon.
A proposal was made a few years ago to HUD that would open up the number of condo complexes eligible to use FHA loans. The loosening of guidelines would also reinstitute spot approvals (similar to what conventional loans do for condos). This makes buying condos WAY easier with FHA loans.
This change will benefit home buyers with average to below average credit making a smaller down payment. Currently, almost all condos are purchased using conventional loans. While someone can qualify for a conventional loan with a credit score of 620+, the mortgage rate and monthly private mortgage insurance rates (for loans with PMI) are significantly higher than an FHA loan. The difference is big – easily over a half a point higher in rate and almost double the monthly PMI (depending on the down payment being made). Home buyers with average to below average credit could be in a position soon to save a couple thousand dollars annually.
Seriously HUD…. What’s the latest?
Looking to buy a condo in Georgia? One program we could use instead of an FHA loan is the Fannie Mae HomeReady loan. This has some advantages over a normal conventional loan that helps those making a minimum down payment on a home purchase. Contact me today, and we’ll see if you qualify for HomeReady whether buying a condo or not.
