Sounds like she initially wanted to go FHA but due to the fact that the development is not FHA approved she is going conventional – Is that correct?

If that is the case, did the lender do a spot approval? The FHA has maintained the same process that they have had for years. If a condo is on the FHA Approved Condo List, then all that is required is a Limited Condo Review, which basically is just verifying that the Owner to Investor Ratio is not below a 51% Owner Occupied.

If a condo is not on the Approved Condo List then a “Spot Approval” is required. This simply means that a Full Condo Review Questionnaire, which consists of 22 questions, will have to be completed by the Condo Management Firm, along with providing a copy of the Condo Budget for the current year with Condo Reserves included.

Moreover, FHA doesn’t recognize “declining markets” in the same manner as Fannie Mae. The additional 5% that she is being asked to put down would lower her LTV ratio which would offer additional protection to the lender in an area that is deemed a declining market.

Hope that helps!

John Agnello
Realtor®

Long & Foster, Real Estate Inc.
1415 Route 70E Suite 106
Cherry Hill, NJ 08034

(609) 320-6700 – Cell
(856) 310-9229 – Fax

Realtor® specializing in the sale and purchase of Residential Real Estate / Servicing the Gloucester, Camden & Burlington Co. areas.

It depends on the ratio of owner occupied to rental units. FHA has requirements that a certain number of the units be owner occupied before it approves a loan.

Laura Giannotta
Keller Williams Atlantic Shore

Hello Sf and thanks for your question.

Unfortunately, the information that your daughter has been told is, in fact, correct in not just Burlington County, but in many parts of the United States where there are many foreclosure or short sale properties on the market. Whenever the market is composed of a larger quantity of "distressed properties" on the market, lenders categorize the area as a "declining market." Depending on the percentage of distressed properties, the downpayment required for a purchase can increase--as you have seen--to much higher levels.

Regarding the condominium complex's ineligibility for FHA loans, that may or may not be true. In the past, developers seldom sought FHA approval because Fannie Mae and Freddie Mac loans were so affordable and available that it made little sense to prequality a community for the more expensive FHA loans. Today, of course, FHA loans are, for many, the only way in which homeowners may purchase a home for minimal down payment. Depending on the skill and knowledge of your mortgage broker, the broker may be able to obtain a "spot approval" for the condominium community, which would make it possible to obtain an FHA loan for the home. Talk with your mortgage broker about obtaining an FHA spot approval for the community.

Good luck, and happy house hunting.

Sincerely,
Grace Morioka, SRES, e-Pro
Area Pro Realty
San Jose, CA