August 28, 2012
If you are thinking of purchasing a condo in the near future, then this article will help you save thousands of dollars on your purchase. There have been some big changes in FHA’s guidelines for financing condo mortgages which can adversely affect the struggling condo markets nationwide. With a massive rise in the popularity of FHA mortgages, the new rules and guidelines adopted by FHA can put a crimp to the wishes of the potential condo buyers or sellers. Before getting a mortgage for a condo you must consider “how much can i afford for a house payment”. Before considering your affordability you should never think of taking a mortgage. Read on to know the changes that has come into effect.
Approvals on the spot to be eliminated: Previously, if you wanted to buy a condo you just had to get an approval from the FHA on the spot. Then, the FHA mortgages constituted less than 5% of the mortgage market. But now with the increasing popularity of FHA mortgages, they have adopted some stringent measures to control their lending standards. Before the FHA insures a loan on a condo, the entire project will have to meet the FHA guidelines. After the change in the FHA guidelines, it takes a lot of money and time to insure a condo loan from the FHA. But the FHA has promised to make the borrowing process cheaper, faster and easier.
30% concentration: To control FHA from facing losses, FHA has made this new rule of 30% concentration. Now onwards FHA will not finance the loans taken for the purpose of buying a condo if 30% of the units do not already have FHA insured loans. This rule has brought about a problem for consumers because it may happen that you want to buy a condo, you cannot get an FHA insured loan if too many people in the building are already having FHA.
50% pre-sale requirement: If a developer wants to buy a condo, then FHA will not insure a loan if half of the units have not been sold out. This restricted people from buying condos with FHA insured loans just because other people couldn’t buy with FHA insured loans. With the new rule, the FHA has reduced this requirement to 50% to provide buyers more choice and to lessen the number of vacant units.
Thus you can see how the lending standards of FHA insured mortgages have become stringent. Now before taking a mortgage for buying a condo, make sure that you consider “How much house can I afford” and take into account the above mentioned changes to alert yourself against losses.