Want to buy a condo but are considering FHA financing? Keep reading…
RISMEDIA, December 7, 2010—Earlier this year, the FHA required all condominium developments to have their developments approved as a prerequisite to lending. Without “Project Approval,” the FHA would no longer insure loans, effectively stopping FHA lending within effected developments.
The FHA loan has become the choice of many, if not most buyers, due to its highly affordable 3.5% down payment. Without Project Approval, the FHA loan and other FHA backed loan products will no longer be available in non-approved condominium developments including loans for refinance, debt consolidation and reverse mortgages.
Under guidance issued by FHA, developments granted project approval prior to January 1, 2008 had until December 7, 2010 to recertify or lose their approved status. Research reveals that to-date, most condos have not recertified.
According to Orest Tomaselli, CEO of National Condo Advisors, LLC, a consulting firm specializing in condominium project approval, the elimination of FHA lending in condominium developments will make selling condominiums more difficult, especially in today’s already challenging real estate markets. “We are seeing a ‘Perfect Storm’ forming in the condominium market.”
Tomaselli is referring to today’s lower number of transactions, lower prices, looming foreclosures and near-record unemployment. “When we see reduced lending in this sector of the housing market, we have to recognize that we will be facing harder times,” he said. “However, there is a solution.”
“Without FHA Project Approval, lenders must decline loan applicants applying for FHA loans as FHA will no longer insure loans in that condominium. The solution will be for the condominium to re-certify their project approval. FHA loan products will become available immediately upon approval restoring the availability of credit within the development.”
Tomaselli advises many, if not most, of his consulting clients to seriously consider FHA Project Approval to create such credit.
