Condo Financing

As many of you know, financing for a condo purchase can be challenging in the aftermath of the financial crisis. Lenders have always reviewed the condo association status before providing loan approval but the burden of project approval and resulting liability of potential inadequate approvals have shifted to the lender. So the process has become more difficult and time consuming.

Here are some issues to be aware of:

1. FHA changed the approval requirements back in February. In the past, lenders checked FHA's web site for approval. If it showed the condo as "approved," we were good to go. If it was not "approved" we submitted a spot approval request and hoped the underwriter would approve it. There are NO more spot approvals. To make matters more confusing, FHA has gone back and forth regarding the approval status of condo associations on the website. The most current information out of FHA's regional center in Atlanta is that if a condo association was previously approved prior to the February change, then the approval will expire on 12/7/10. Lenders may want to recertify that the investor concentration in the community is still below the maximum percentage before granting approval. Associations that were not approved or have not been recertified will require new certification and approval; a process which will take at least 60 days to complete. If the condo has already gone through the new approval process then a different expiration date will appear. But it is up to the each borrower's lender to again certify that the community meets FHA requirements. And that process can be just as lengthy.

Fun stuff, eh?

2. Conventional loans require the condo project to be approved through a project management review system. The process is not as time consuming but much of the same information will be reviewed for approval.

3. VA loans haven't changed the requirements. Check for approval status using the following link: http://condopudbuilder.vba.va.gov/2.2/frames.html

Either way it is clear that the lender and real estate professional will need to work together in an effort to expedite condo association approvals. Here is a list of some of the items that we will be gathering:
1. Completed FHA Condo Questionnaire.
2. Copy of the recorded Declarations, Covenants, & Restrictions.
3. Copy of the By-Laws.
4. Copy of the Articles of Incorporation.
5. Copy of the master insurance policy.
6. Copy of current and previous year's budget outlining income, expenses, and reserve amounts.
7. Copy of current reserve plan and balance sheet showing reserve balances.
8. Copy of the preliminary title report.
9. Appraisal.
10. Copy of Recorded Plat.
11. Flood Certification and/or copy of FEMA map for location.

Issues to be aware of: investor concentration, percentage of FHA loans in the community, any future additions or special assessments, pending legal actions, single entity ownership, adequate reserves.
Please contact me directly if I can help you with your real estate or mortgage related need. Thank you!