Yesterday I commented on a blog that Donna Bigda wrote on Condominiums, and she suggested that I add a couple of links for Buyers to have as a resource.
The comment that I made was that most Condo Loans that I do are for First Time Homebuyer, and that FHA and Connecticut Housing Finance Authority (CHFA) are the two main loan programs that I use for them, because most First Time Homebuyers do not have much money to put down on a house or condo. I also suggested that if a Realtor is working with a Buyer that will be using one of these two loan programs, that they need to make sure that the Condo Complex is on the Approved Condo List for FHA and/or CHFA.
This is very important step in purchasing a Condo with either of these two loan programs, because if the Condo Complex is not on their approved list, you might not be able to do the loan. I say might, because even if the Condo Complex is not on their approved lists, a "Spot Approval" may still be possible. The main obstacle that I find with being able to do a "Spot Approval" is that many times a Condo is not on these approved lists, because they either do not meet the Investor to Owner Occupied Ratio required, or the Condo Association By-Laws contains a "Right of First Refusal Clause". Both of these are like the kiss of death in obtaining a "Spot Approval" The Investor to Owner Occupied ratio that is required is 51%. That is 51% or more of the units need to be occupied by owners.
If a Borrower is trying to do a CHFA Loan on a Condo, both CHFA and FHA Condo lists need to be checked, because CHFA is a FHA insured loan, so the Condo Complex needs to appear on both list. This may seem like a simple process, and it is, but it is amazing how often no one checks these list, and then finds out after they make an offer that they have a problem.
Below are the links for these to lists, I would suggest that anyone reading this bookmark these two sites for future use.
******************************************************************************************************************
Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com
George,
Thanks for the links! I don't think I'll need the Connecticut Housing Finance Authority, but I'll get allot of use out of the FHA link.
Bill
George - thanks for the informatin. I make sure to mention these issues with buyers in my area since I have found that many condos are not on the approved FHA list. My understanding is it can take a couple of weeks to get the spot aprpoval, so buyers need to plan for extra time (and that, of course, depends on how helpful the HOA is...some are very slow to respond even with normal sales and providing the required HOA docs and budget).
Jeff
Bill, I am glad that it will be the useful to you.
Jeff, yes they can drag their feet. We usually try to get the Condo Doc's from the Buyer and copy them so that they don't have to pay for a second set, and also try to get the Condo Management Firm to answer the questions on the Condo Questionnaire over the phone, so that we are not waiting on them.
Great links for resources on condo approved lists. (actually, had to get over here and say hi to my good buddy and great info for your area friend)
Sally thank you, always nice to see your face pop up on my screen :)
George - Great post to piggyback on the infomation you gave me yesterday with the links to the CHFA and FHA approved condo lists. Thanks for the link love. :)
Donna your welcome and thank you for the idea for the blog.
I send my clients the link to the FHA condo approved list all the time. Sometimes they are frustrated because the condo they like is NOT on the list. However, that is not the end of the story. With all of the foreclosures, some on the list still do not meet the 51% owner occupancy rule! There are other obstacles as well... insurance is one! Perhaps you can fill us in on some of the other hurdles that realtors and buyers should be aware of.
George I also read Donna's post and this information is a great addition. I think a few of the complexes I know of would not make the 51% rule, too many rental units.
Joan, the 51% Owner Occupancy and the Right of First Refusal are the two biggest obstacles that I run into. The other problems that I do not see much, but do happen are Condo Reserves not being shown on the Budget, and one Owner owning more that 10% of the units, which tend to be a problem with small complexes.
Jennifer, the Condo's that I run into that have an Occupancy problem are usually the lower priced ones because they are very attractive to Investors. But it the Condo is selling for $120,000+ it is usually not a problem.
I appreciate this information. I was just going through this myself. I am in search of a condo for my buyer and found a property that the buyer was interested in. I asked the listing agents all the right questions and although she didn't have the answers she promised to get back to us. You are right; it slows down the process. However, I wasn't aware that so few buildings/properties will qualify for FHA loans. That is good to know.
Anja, right now with Conventional Loans being so difficult to do on Condos, Condo Associations would be wise to look at their By-Laws and make sure that they can qualify for a Spot Approval.
If a condo is on both approval lists does this mean we do not need to worry about the 51% owner ratio?
George.. I just went to the CHFA link above and it is down.. could be for maintenance.. not sure. Is there another link I can use?
Valerie, CHFA no longer has a Condo List and is using the FHA List only.