Condominium Loans and FHA Mortgage Changes

FHA announced new guidelines that will effect Condominiums beginning this fall.  With their mortgagee letter, HUD (which governs the FHA Mortgage Loan program) changes the Spot Approval process, so that mortgage lender’s will be required to look at the overall “health” of the project. 

You’ve read the news – massive numbers of people are behind on their mortgage payments.  Guess what?  Turns out massive numbers of people are ALSO behind on paying their Homeowner’s Dues!  FHA currently allows the mortgage lender to receive MINIMAL information on the Condominium project if they are only making one loan in the project / building.  Starting this fall, that will change and the lender will be required to approve a whole condo project.

The real question will be how long the approval process will take, and that could depend on what TYPE of mortgage “lender” you are doing business with.  To obtain the condominium approval (beginning this fall) the Lender will have 2 options:

1. HUD Review and Approval Process (HRAP).
2. Direct Endorsement Lender Review and Approval Process (DELRAP), outlined in this Mortgagee Letter. This option is only available to lenders who have unconditional Direct Endorsement authority and staff with knowledge and expertise in reviewing and approving condominium projects.

This applies to virtually all condominium projects – however, as you are considering an “established” (or existing, or “Used” condominium), there is an ongoing, constantly updated list of approved projects.  Click here to find out if your condominium project is on the approved list!

Does this mean that FHA thinks purchasing a condominium is more risky? Yes.  Condominium owners rely on those around them to keep the building in top shape, as opposed to a single family residence.  However, this does not mean everyone should avoid condominiums, only that FHA/HUD will be looking at the over budgets, reserves, and liability insurance coverage to be certain that the project is “healthy” and a good investment!

If you are a FIRST TIME HOMEBUYER – remember that if you purchase and close prior to the end of November, 2009 – you might qualify for a $8000 check from the Government!  Click here to learn more about the $8000 credit to First Time Homebuyers!

If you are considering purchasing a home in Cary, NC – or refinancing in Raleigh, NC, please contact Steve and Eleanor Thorne.  Our office number is 919-649-5058 x 104.