Don't forget about December 7th, the FHA condo process is changing!!!
http://www.mortgagejaw.com/fha-new-condo-approval-process/

Important items to look at:
1. Max of 33% FHA financing allowed in the condo project. (1-4 unit condos, only 1 can have FHA financing)
2. "Right of first refusal" gone. Yes! but wait......
3. No more "Spot approvals" so condo project must be approved the old fashion way or through a Direct Endorsed lender...as we are. :)

There are a few more changes within the mortgagee letter and at the website directly from HUD. Hope this helps :)

My consulting company can help your condo association get your project approved for FHA financing. With an FHA approval you can also use that FHA approval for Conventional financing( Fannie Mae and Freddie Mac). Both Fannie and Freddie accept the FHA approval on condos.
I can be reached at sstenger@foxvalley.net or by phone at (847)293-2962 if you have any questions.

Steve Stenger
President
Stenger Consulting Services

Nike thanks for taking the time to personally look at my situation and your input.
Thanks to everyone else whom answered as well. I got my answers and will not be pursuing conventional financing for this deal.

FYI for anyone interested- starting in October 2009- FHA is changing the way they handle right of refusal
http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/fi…
they will allow spot checks to pass long as there is no discriminatory language.

Hi Tahsha,
Thank you so much for choosing my initial as your best response.
I believe your biggest problem is the "first right of refusal" that the condo association has. This is actually not good for you either, because it makes this condo association very powerful when it comes to making decisions about unit owners in delinquency, No mortgage company is going to let anyone have decision making powers before them on any property on which they have a lien.
The first step would definitely be for your attorney to try and work with the condo association, to see if they will waive their ROFR concerning this specific unit. (Yes, I've seen it done). If they will not, this property is automatically not insurable by anyone, not HUD, not FNMA and not Freddie Mac.
Regarding the lack of reserves and delinquent units, an updated budget and other docs plus a strong letter of explanation would take care of that, since the picture has changed since their first budget and they can now show reserves etc.

I would still be concerned however, about the power level of this association. Buying is only one part of the marriage. You would have to live with these people and obey their rules until you sell, so please read those condo association rules thoroughly before you sign any contract, and make sure your attorney explains them to you so you are clear on your limitations.

All this difficulty might actually be a sign...

Sincerely,

Nike Fasanya,CMC
President

Tasha,
It seems that you have a question no one is answering. No one is addressing if you have other options. Truly they can not without knowing more about your financial profile and the condo itself. How much are you putting down and how is your credit are important questions to answer. Another thought is that if there are budget issues in a condo are you getting into something that can come back and bite you. Will there be financial issues for the condo association that you are inheriting.

I would look closely at the problems of the condo and consider whether I want to take on their issues.

Personally if FHA is not an option and that is the best financing answer for me I would look for another place, there seems to be some red flags here.

Hi Tasha,

I am a Mortgage Broker and have done FHA loans with spot approvals consistently since 1997.

I will address this from as many angles as I can:

1. The Lender or Broker did not do their job well. In order to get a spot approval, the Lender requests a Condo questionnaire from the Condo Management company. They look for certain things on there. The spot approval will usually be denied if:
a. There is a high percentage of rentals in the building.
b. The association is involved in a lawsuit
c. the association has "first right of refusal" if anyone wants to sell the unit
d. The association does not have the required amount of reserves, insurance or other requirements to fulfill the FHA guidelines

These are some of the major things they look at.

If the Processor on your loan had reviewed the condo questionnaire after gertting it back, it would have been discovered right away that you could not get a spot approval, and you would not have had to go through the emotional trauma of having your condo not be approved for an FHA loan.

As a matter of fact, the reason for the denial might be something reversible, but your Lender might just not want to have to deal with the hard of work getiting enough information to make that decision. Remember, a Company is only as good as it's employees.

Please look me up at http://www.marvelmortgage.com or call us at (773) 779-1190. and let us take a look at your situation. I would love to take this challenge on, and see how we can resolve it.

Sincerely,

Nike Fasanya, CMC
President
Marvel Ventures Mortgage, Inc

So I am guessing lack of reserves? The seller should know tell his fellow units owners and Board members that his unit is not marketable. Then they have an obligation to fix the issue and as a practical matter it hurts all their home values also. So you may need time, but its possible the seller and the association can fix the issue, by raising a special assessment or something. I am suggesting this because other buyers of mine have had the same issue.

Good luck!

Jeff- it didnt pass due to HOA budget issues.

Do you know why it did not pass a spot check?

These spot approvals are kind of on the back burner per HUD. Without putting it in writing, they tell us they suffered a tremendous loss with condos last year and they really don’t want to finance them at this time. We are having a very hard time getting new complexes approved even going to long way.

Not sure when this will get better

Tasha,
I am curious as to why the complex did not pass spot approval? In my experience, lenders interpret the fha guidelines in different ways. I have had one lender say a complex is not on the fha list and another provide fha financing. You may want to get a second opinion from another lender but be prepared to either come up with a higher down payment for conventional financing or find another complex.
Best of luck!