Category Archives: does my condo qualify for FHA

FHAs Back to Work Program Waives Waiting Times

(Courtesy NKS Financial)

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Purchase again sooner than you think

The Federal Housing Administration (FHA) recently announced its “Back to Work” program, which is giving individuals who suffered a long period of hardship during the recent housing crisis a second chance to prove they can carry a mortgage and own a home.

The program will waive many of the waiting periods associated with a significant “economic event” such as bankruptcy (Chapters 7 and 13), short sale or foreclosure.

Potential candidates may be first-time or repeat home buyers, and the program can be used for the 203K rehab loan. It must be approved by an FHA lender, and as some lenders are choosing not to participate, you may want to contact your mortgage professional for more information on this.

Eligibility

To participate in the program, individuals must be able to demonstrate they’ve recovered fully from the “event”, and document the fact that they did have a household income loss of at least 20 percent for a period of at least six months that coincided with the “event.” They also need to prove current, stable and documentable employment to qualify.

As well, they need to demonstrate a 12-month positive payment history, and this specifies on-time payment of all mortgage and installment debt. There is some latitude for credit card debt, but it is slight.

Counseling sessions

Applicants also must attend counseling sessions before being able to participate in the program. This is usually a one-hour session with a HUD-approved counselor, and was designed to help participants prevent the “economic event” from happening again.

Qualifying A Condo for an FHA loan

If you are in the market to purchase a condo and are using an FHA loan (most loans now are FHA), then you or your agent can use this site to see if the home that you want to make and offer on is FHA approved.

What does that mean? It measn when many of these developments were constructed several years ago, there were no FHA loans and so no one bothered to go thru the FHA certifiation process. So many of the developments are not FHA approved.

Single family homes are usually approved for FHA financing as long as the price parameter and the condition requirements are met. Attached housing (condos and townehomes) need to be FHA approved. Read further for more details on how this works:

HUD Section 234(c) of the National Housing Act provides authority to insure any mortgage covering a one-family unit in a project coupled with an undivided interest in the common areas and facilities which serve the project. The project may include dwelling units in detached, semidetached, row, garden-type, low- or high-rise structures. Generally these types of properties are referred to as Condominiums.

HUD will insures mortgagees against losses on mortgage loans used for buying a condo or to refinance individual units in eligible condominium projects provided that they meet certain guidelines.

A. Project Eligibility. The condominium project must be on HUD’s approved condominium list.
B. Applicant Eligibility. Eighty percent of the HUD-insured mortgages in a condominium project must be the principal residence of the owners (owner-occupants).
C. Maximum Insurable Mortgage: Same as Section 203(b) (except that the mortgage amount must be in multiples of $50).
D. Minimum Investment: Same as Section 203(b).
E. Mortgage Term: Same as Section 203(b).
F. Mortgage Insurance Premium: Monthly+Upfront MI of 1.5%
G. Refinancing: Same as Section 203(b).

If the Condominium is not approved then the Lender may go through the “Spot Approval” process.

The following requirements must be satisfied before a spot loan is endorsed:

• The condominium project must be complete. There should be no ongoing or anticipated addition of any units, common elements, and/or facilities.
• Control of the common areas of the project must have been turned over to the unit owners association for at least one year.
• The owners association must provide evidence that the project has the appropriate hazard, liability and flood insurance.
• Individual units in the project must be owned in fee simple or be an eligible leasehold interest. The project’s legal documents must provide for undivided ownership of common areas by unit owners. By virtue of this ownership, unit owners must have the right to use all facilities and unrestricted common elements.
• The project’s documents should not place any legal restrictions on conveyance. Any provisions that seek to limit the free transferability of title is generally unacceptable. Such restrictions include rights of first refusal and restrictive covenants. Certain governmental or nonprofit programs designed to assist in the purchase or rental of low- or moderate-income housing are exempted from the restrictions on conveyance provisions.
• At least 90% of the units in the project must have been sold.
• At least 51% of the units in the project must be owner-occupied.
• No single entity may own more than 10% of the units in a project. “Entity” includes an individual partnership, corporation, limited liability company, limited liability partnership, joint venture, investor group or other natural or legal person qualified to hold an interest in real property. The 10% restriction does not apply when the ownership of less than three units would disqualify an otherwise eligible project.
• HUD recognized that the 10% cap on the number of units that may secure FHA insured mortgages in a given project can place a small regime at a disadvantage, since only a few units will invoke the limit. Accordingly, a two-tiered system was established. For condominium projects having more than 30 units, no more than 10% of the units may have FHA insured loans at any given time. Condominium projects consisting of 30 units or less, can have up to 20% of the units encumbered by FHA insured mortgages under the spot loan rule.