Stephanie Cr…, Other/Just Looking in Chicago, IL

Should we make our condo FHA approved?

Asked by Stephanie Crain, Chicago, IL Mon Jun 2, 2008

One of the unit owners in our condo building is desperately trying to sell, and her realtor suggested making our building FHA approved. We know it's a crappy market for buyers, and FHA approval can help with the lending aspect. But will it hurt the building in the long run once the economy turns around? Will we attract unsavory buyers?

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I really do not know where Joe gets his (mis)information. First of all, when a community is HUD-approved, both FHA and VA loans will be permitted. You cannot exlcude FHA while allowing VA and vice versa; again, HUD-approval means approval for both FHA and VA. If Joe is in favor of VA and not FHA, then I am confused. A VA buyer can purchase a home with absolutely no money. In fact, a vet can finance more than the purchase price but throwing in part or all of the closing costs. I wonder if Joe feels that just because someone is a veteran that individual is more "desirable" and has better character. Additionally, Joe seems to feel that it is the government-insured mortgages that created the mortgage crises. "They basically encouraged home ownership via government guarantee." This is also incorrect. The majority of defaults that we are seeing are due to high loan-to-value conventional mortgages. Many of these were 100% mortgages or even up to 107% mortgages, when buyers rolled their closing costs into their mortgage. These were not government guaranteed loans. In fact, during the time that 100% mortgages flourished, very few buyers were purchasing with either FHA or VA mortgages!

Problems with industry-wide deregulation set the state for our current mortgage crisis: Simply stated, there were no checks and balances and fraud abounded. People purchased homes they couldn't afford. Mortgage documents were falsified; and unscrupulous lenders profited by providing loans that they knew would end up in default. But, it is not fair to blame FHA.

I have on several occasions sold homes to graduates from medical,dental, or law schools, who used high loan to value mortgages. Have you ever seen what the student loans look like for someone who has graduated from medical, dental or law school? These individuals are just beginning their careers and they often don't have the downpayment and closing costs for a conventional loan.

Again, I am president of my unit owner's association and am also a Realtor. I am extremely concerned about defaults on monthly condo fees. But, guess what? Even though my community is not HUD-approved, we have still had delinquencies. And I am not convinced that excluding FHA and VA buyers would guarantee a lower default rate.

It is my understanding that FHA is undergoing major change and moving in the direction of being more conservative. FHA is proposing that the downpayment requirements will be increased from 3.5% to 5% and the maximum seller assist (money credited from seller to help buyer with closing costs) will be decreased from 6% to 3%. Additionally, minimum acceptable credit scores, which are now 620, will be raised. We are uncertain when these changes will take place.

No matter how you slice it, with FHA loans up to $416,000 in my market area, this is definitely not your grandmother's FHA. It remains a viable option for many buyers, including many who qualify for conventional financing!
6 votes Thank Flag Link Wed Feb 3, 2010
About 90% of the deals I closed last year were FHA deals. Buyers are using an FHA product. To sell a condo to an FHA buyer, the building needs to be FHA approved. If you are worried about values, imagine if the owner who is selling gets foreclosed on and loses the property to the bank. The bank lists it at $99K. Since it's not FHA approved, it gets no offers. Bank cuts the price again and again and again. Finally, it's at a price where a cash buyer picks it up for $30K. Now on top of not being FHA approved, you have a $30K comp in your building.

As for "unsavory buyers," I don't know what that means. I just closed on a $980K condo in the GoldCoast that used $417K FHA first, $300K HELOC, and the rest in cash. The buyer was a doctor. People use FHA because the down payment is less, and the interest rate is low.


The information in this answer is general information and is not intended as legal advice, nor do I intend to create an attorney-client relationship with any reader by answering this question or otherwise contributing as a member of Trulia.com.
4 votes Thank Flag Link Wed Jan 5, 2011
I love that we have a board president and a “other just looking” spouting off FHA slurs…I’m a lender and have worked with our nationwide bank for over 25 years. J if you can point me in the direction of an MI company that will fund an FHA loan with a 500 Fico score, I could pay you more in commissions than you could spend. NO entity in the USA especially in this market is even looking at any loan program if the borrower has under 650. If you have such problems with the program don’t use it. You guys both must go nuts over the VA program…

Without FHA
1. Prices come down to reasonable levels, because less people qualify (rightfully so)
So for those of you have watched you values get rocked be prepared to watch them get cracked. Reasonable levels is a funny statement to make, even bank appointed appraisers pull comps on other properties and by the way every appraisal form in the country has a check box that says “FHA approval” if that box is not checked the value of the property drops.

2. Home ownership is thus more affordable..Lower mortgage payments
This is a very discriminatory statement to make what do you mean when you say more affordable? To whom are you refereeing 87% of home buyers in the US are planning on using this loan program.

3. People are less likely to become late on their payments as a result.
This is maybe a fact in your building (although it is obviously not FHA approved so I’m guessing this is yet another fact you are fabricating) but the actual truth is FHA loan holders have both a smaller foreclosure rate and delinquency of HOA dues as well. FHA loans are also the only loan in the country that will work with a home owner If they lose their job and are unable to make payments…they adjust the loan so the person can pay their other bills.

4. People are less likely to skip out on HOA Dues
Wow…and you are gathering this information from….

5. With good HOA dues, the complex has more money to fix itself up
And without FHA approval as units sit on the market it drags down property values…funny if no-one is in those units who is paying the HOA dues? The seller…because obviously when you are leaving an association you are concerned with it’s health…

6. Prices rise naturally, as a result of a better complex that is funded well
…prices raise? What state are you in? In CA where you claim to be from condo associations without FHA approval have not gained 2% in value state wide whereas FHA associations have increased values by over 12% look at the state index it’s public information of the exact loans and property values…these are not made up numbers but the exact numbers in your own state!

With FHA
1. People have no skin in the game, so there's less incentive to make payments
They don’t have as much skin in the game would be the correct way to word this sir. The smallest amount that can be put down is 3.5% however once again in the state of CA the average FHA buyer is putting down 10%. Not as much yes none…again not accurate.

2. Home prices stay (artificially) high
High huh…so let me get this straight you would rather property values drop and only people with 20% down are able to purchase a home…I’m assuming you would like to get rid of VA (the veteran loan program) as well “those” people must really grind your gears as they don’t have to put anything down.

3. Mortgage payments (coupled with FHA) are higher.
What? Please provide your source for this statement.

4. When people can't make the payments, they skip out on HOA dues first
Again since you are not an FHA approved association please provide a source for this statement. NAR, CAI, and NAMB all have reports on their own websites that would state the opposite…I’m willing to see where you are pulling your facts from though.

5. The HOA has less money, and the community suffers
The HOA has less money?...answer the question above and maybe then this will make sense…

6. Downward spiral into hell
WOW!
4 votes Thank Flag Link Fri Aug 13, 2010
J- I am not saying that the FHA program is perfect, as you have so eloquently pointed out no government program ever is. However I think it is a very risky decision to tell someone they should not get FHA approved for financing…there are not a whole lot of options left for condos…not to mention an association can be sued for discriminatory practice by not even attempting to get FHA approved…it is up to an association to look at the risk and ultimately decide for themselves…everything is controlled by the government these days…except cash purchases which you could also argue they have a hand in…

FREDDIE MAC

Freddie Mac also is a chartered government-sponsored enterprise (GSE) that operates in the secondary mortgage market. It too is a ward of the state.

Like Fannie, Freddie securitizes residential mortgages for sale in the secondary market and purchases single-family and multifamily MBS for its mortgage-related investments portfolio.

Also like Fannie, Freddie was placed in conservatorship in September 2008 by the FHFA.

A week before Geithner convened a conference to plan the overhaul of the housing finance system, Freddie requested $1.8 billion in federal aid, bringing its total request since the takeover to more than $64 billion.

In August, Freddie reported the best three-month performance in a year, posting a loss of $6 billion. It reported its year-to-date GSE market share in 2010 at 42 percent after a plunge to 37 percent in 2009.

FEDERAL HOME LOAN BANKS

FHLB is a cooperative of 12 regional banks that provide funding for community housing to lenders. Created by Congress, the system has been the largest source of community mortgage lending and community credit funds.

The 12 banks are privately owned and regionally controlled; members include thrifts, commercial banks, credit unions, community development financial institutions and state housing finance agencies.

FHLB stock is held at par value by more than 8,000 regulated financial institutions and is not publicly traded. Equity purchase is necessary to join the system and ensures self-capitalization of the entity. FHLB isn't supported by taxpayer money but enjoys special tax breaks.

GINNIE MAE

Ginnie Mae, or the Government National Mortgage Association, is a government-owned corporation that issues securities explicitly backed by the U.S. government. This explicit guarantee distinguishes Ginnie from Fannie and Freddie. Ginnie also does not hold any of its own bonds.

Ginnie Mae guarantees investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans, mainly loans insured by the Federal Housing Administration or guaranteed by the Veterans Affairs Department.

Ginnie Mae accounts for roughly 10 percent of the MBS market, ensuring timely payments on those securities, but it doesn't purchase, sell or issue securities itself.

FEDERAL HOUSING ADMINISTRATION

The FHA is a federal regulator that is part of the Housing and Urban Development Department. It oversees Fannie, Freddie, FHLB and other mortgage lenders and provides mortgage insurance on loans made by the FHA-approved lenders for lower-income and first-time buyers.

The agency now insures about 5.4 million single-family home mortgages at a combined value of $675 billion, making it the world's largest insurer of mortgages.

Together with Fannie and Freddie, the FHA backs 90 percent of new U.S. home mortgages. FHA picked up much of the slack as conventional loan lenders and private insurers were squeezed by the credit crunch in 2008.

FHA runs on self-generated income without dipping into taxpayer money. However, federal agency Ginnie Mae guarantees the loans insured by the FHA, meaning taxpayers may be under the gun if FHA-backed mortgages get in trouble and the federal government has to pay out investors who own Ginnie Mae stock.

(Compiled by Alina Selyukh, Editing by Chizu Nomiyama)
3 votes Thank Flag Link Thu Aug 19, 2010
J by the way HUD’s FHA loan program is the only self funded government program in existence. Your assumption that it’s being funded by tax payer money is incorrect. Go through the HUD site and you can verify this. The only time tax payers would see any of their money go toward FHA anything would be if they all of the sudden ran out of money…which has not happened since the existence of the program.
3 votes Thank Flag Link Fri Aug 13, 2010
FHA is good for only one thing: Getting people into a home when they should be renting instead, and keeping home prices artificially afloat.

The free market should be the one to decide whether certain people get a loan or not. Not the federal government.

If all these FHA loan applicants were so wonderful, don't you think the banks would want their business?

We've obviously learned nothing these past few years, and I stand firm in my feeling that down payments are a good thing.
3 votes Thank Flag Link Tue Jun 22, 2010
Hello Stephanie and thanks for your post.

Once the community has been built and there are homeowners within the buildings, it is usually close to impossible to get the entire community approved for financing by FHA. The reason is that its usually pretty difficult to get occupancy, delinquencies and reserves to the levels necessary to meet FHA rigorous guidelines. There are some mortgage brokers skilled enough (and I suspect Michael Wallace is one of those brokers) who can get a spot FHA approval to allow for a home sale to a buyer who must use FHA loan.

I find it interesting, however, that so many home owners and those representing homeowners associations cite FHA buyers as the reason for delinquencies, foreclosures, government bailouts, etc. All of these comments are either incorrect or unsupported.

As Jon stated below, most of the defaults of late have been with those homeowners who purchased using "conventional" financing that is either sold or guaranteed by Fannie Mae and Freddie Mac. This is the reason that both Fannie and Freddie almost went bankrupt--so many of their loans were defaulting, that the entities could not cover the losses. J, the government's own "bailout" plans for mortgage holders affected only conventional buyers (those with Fannie loans) and never once provided guarantees or help to those buying with an FHA loan or who currently have an FHA loan. And many, Presidet Joe, of those defaulting now had as much as 20 percent equity in the home before the market fell, so the 20 percent down payment has not slowed the rate of short sale or foreclosure transactions.

As for FHA's loan programs--it is not a program intended to help indigent Americans; it provides funding to those who are new to the home market, and may not yet have accumulated funds for a down payment. It was NOT intended to help those who are or were unqualified to purchase a home, suddenly be able to buy a home. At present, only those home buyers who have not owned a home in more than one year, who have a FICO mid score of at least 620 (for low balance) or 660 (for a high balance) can qualify. FHA checks income visa a vis two years of certified tax results from the IRS, and they also make certain the property being purchased is, indeed suitable for habitation. Also--and this should not be overlooked--FHA loans do not have to comply with HVCC appraisal rules, so the home values are proving to go up slightly with an FHA appraisal versus an appraisal for a conventional loan due to the more rigorous requirements of HVCC and the 'trending" element required for all valuations under these new rules. So there are plenty of reasons to look to FHA buyers with fresh, and hopefully, open minds.

Finally, I find it interesting--as an Association Manager--that anyone would claim that the Board or Association knows who has an FHA loan and who does not. In fact, neither the Association Manager nor the Board of Directors is ever provided with this information, so we cannot tell if the person who just defaulted on their loan (and their homeowners association assessments) bought the house with a Fannie backed or FHA backed loan. So while I'm certain President Joe feels that FHA buyers have been the bain of the Association's financial and operational woes, the truth is--because we are never told who is backing the loan--Joe's comments are strictly speculation and he cannot prove it unless he's checked the loans of each of the buyers. Even in default, we are not told who guaranteed the loan--only that the name of the bank holding the mortgage. So while I am certainly not trying to belittle President Joe's angst over their Association's problems, I know that defaults and homeowners issues come wrapped both in an FHA purchaser as well as a conventional loan purchaser blanket.

I think, in order to truly have a discussion about the merits of the FHA loan program or whether a community should look to FHA, it's probably in the Association's best interest to consult a qualified and educated loan broker to help divine fact from fiction, or, in this case, misconception. You can start with Michael Wallace on this site, and if he cannot help you, I'm certain he can find someone in your area who can assist the Board and your members in having a fruitful and frank discussion in this matter.

Sincerely,
Grace Morioka, SRES, e-Pro, CID Expert/Consultant
Area Pro Realty
San Jose, CA
3 votes Thank Flag Link Thu Sep 17, 2009
To: President Joe

FHA doesn't lend any money, they insure it. When you get an FHA loan you have to pay insuance. If you default FHA pays using the insurance money they have collected. So far they haven't run out of insurance money. Meaning they have not gone to us tax payers to get bailed out. FHA has been around sinse the 30's and they have never had to go to us the tax payers.

The above third grade grammer is for you President Joe. Do you understand it now? If I get an FHA loan it will be via a bank such as Wells Fargo. They may sell that loan, but not to FHA.

Wells Fargo is hot to do reverse mortgages. Why? The loan is backed by FHA. FHA just increased the premium from .55 to .90 They did this so that they will not run out of money. The customer of FHA pays the premium. Da!

I assume the condo that you are the dictator of is not FHA approved. Anyone wanting to sell can not sell to an FHA buyer. FHA accounts for 70% of all condo financing. You are cutting out 70% of the buyers. Good move President Joe. The residents of your community must be very happy with you. Esp. the ones who are selling right now. You have removed 70% of the buyers for them.
2 votes Thank Flag Link Thu Nov 11, 2010
All I can say to all of your responses J is ridiculous! Your comments are border line racist and discriminatory.

FHA is not Section 8 because you have to qualify for the loan. The collapse of the real estate market had more to do with no money down, no income and no asset verification of Conventional financing than FHA.

FHA's delinquency and foreclosure rates are better than Conventional loans. I am not sure what all the anger over FHA is about.
2 votes Thank Flag Link Thu Nov 11, 2010
By being FHA approved your building will be open to a larger pool of buyers. Having FHA buyers does not necessarily make a building less attractive.
2 votes Thank Flag Link Wed Nov 10, 2010
Absolutely not and in fact without FHA approval you are seriously hurting yourselves. as there is virtually no funding available for non - FHA approved developments. Any advice otherwise is given by people who have absolutely no idea what their talking about, are ignorant of how the mortgage markets work and have no reason to be responding to your question other than to voice their ill formed political opinions.

FHA loans have strict qualifications, and while they enable buyers who don't have 20% to put down to buy real estate, they do require a substantial amount of up front money, credit scores still need to be strong, and income to debt ratios need to be inline.

Bear in mind that your units may not qualify depending on the price range. Also bear in mind that if more than 30% of the units are investor owned (i.e. rented) then your development will not qualify for FHA lending.
2 votes Thank Flag Link Wed Nov 10, 2010
Just say no to FHA.

The government is once again stepping in to make a mess by encouraging home ownership, in an effort to artificially inflate home prices. Realtors endorse FHA because they're in the business of selling homes. They're basically in bed with the government on this one.

Without FHA
1. Prices come down to reasonable levels, because less people qualify (rightfully so)
2. Home ownership is thus more affordable..Lower mortgage payments
3. People are less likely to become late on their payments as a result.
4. People are less likely to skip out on HOA Dues
5. With good HOA dues, the complex has more money to fix itself up
6. Prices rise naturally, as a result of a better complex that is funded well

With FHA
1. People have no skin in the game, so there's less incentive to make payments
2. Home prices stay (artificially) high
3. Mortgage payments (coupled with FHA) are higher.
4. When people can't make the payments, they skip out on HOA dues first
5. The HOA has less money, and the community suffers
6. Downward spiral into hell

I've been president for three years we turned our community around and did a full 180. Home owners are happy and the place looks fantastic now.

No thanks to FHA or the government. All they ever do is make a mess out of things.

-President Joe
2 votes Thank Flag Link Wed Aug 11, 2010
Here's what my buddy Peter Schiff has to say about FHA. He's another guy who actually gets things right.

http://www.youtube.com/watch?v=JZi7uquwZKQ
2 votes Thank Flag Link Wed Jun 23, 2010
We are a 14 unit condo complex, not FHA approved, 100% owner occupied, with >10% of budget to reserves, appearing to meet the FHA requirements. One owner wants to refi with FHA because of school loans etc. He told us it would cost us $500. Should we charge that one owner?

Second, in a foreclosure of an FHA unit, a greatly reduced selling price will negatively affect values from an appraiser using comps. What is the experience with FHA failed loans? With a low down payment and therefore a higher mortgage payment, isn't there a greater probability of loan failure?

We need some help, please!!

p.s. Steve from condo approval inc, we do not need a sales pitch, saw your website.
2 votes Thank Flag Link Sat May 15, 2010
Listen everyone, I'm not saying that every single person who uses an FHA loan is a deadbeat. The delinquency ratios speak for themselves, at the time of my first post I believe it was somewhere around 16% of FHA loans being delinquent.

I moved out only 2 months ago. The place was a terrible ghetto and we really cleaned it up over the years. I'm not taking all the credit, but I can tell you that everyone who is moving in has put down a nice down payment and the quality of people has really changed. And FYI, the condo is my second home.

Homeowners thank our HOA Board all the time, not only in person but in letters.

I feel that if people need a loan, a bank should be doing it and not the federal government. This does not make me a bad person. I don't like seeing the American tax payers being ripped off as our money is being mismanaged by the government.
2 votes Thank Flag Link Wed Feb 3, 2010
If a doctor is using an FHA loan to get a home, something is wrong with the system.

The government needs to stop handing out FHA loans. They need to let the free market land where it's naturally supposed to land.

Government intervention only stirs the waters, causes bubbles, and basically screws things up.
2 votes Thank Flag Link Wed Feb 3, 2010
Reading the answers,
It would appear that after 3+ years, this banter has run it course.
1 vote Thank Flag Link Wed Aug 31, 2011
All most Realtors do is repeat the basic garbage that NAR puts out.

Such as: "It's always a good time to buy" ... "FHA is good for the community because it lets anyone get a home", "Real Estate will never bust", etc, etc.

Check out the title of this book and laugh. It's written by the main guy of NAR in 2006.

http://www.amazon.com/Real-Estate-Boom-Will-Bust/dp/0385514352

National Association of Realtors = Zero Credibility
1 vote Thank Flag Link Wed Aug 31, 2011
Its about the FACT THAT REALTORS ARE IN IT FOR THE SALE AND THEN WALK AWAY

And that is ok

But for those of us who stay in the condos etc we KNOW THAT THE MORE $$$ /EQUITY THE BUYER PUT IN / HAS, THE BETTER OFF THE PROPERTY

ALSO, as if you didnt already know, ANYTIME POLITICIANS GET INVOLVED, TROUBLE LOOMS FOR THE CAPITALISTS

MAYBE NOT IN THE SHORT RUN,,, BUT DEFINITELY IN THE LONGER RUN
1 vote Thank Flag Link Wed Aug 31, 2011
Understand: The HOA, The Realtors, and The Sellers have different motives.

Realtors and Sellers will be in favor of FHA, solely for the reason that it makes an easier sale - at a higher price. Sellers and Realtors do not care about the long term state of the complex after their sale. They care not about delinquency, collections, standard of living, or the balance sheet. Their argument is that losing FHA hurts prices. This is about money to them.

From the Association's standpoint though, we see things differently. We work in the best interest of the complex and the people who choose to stay and live in the complex.

FHA is not in our best interest. It allows people who "otherwise would not qualify", to purchase a home, and with very little skin in the game.

I've been HOA president for over 4 years now. We no longer have FHA and we're very happy. Delinquency has declined majorly. It's close to being gone, and it was a terrible problem in the past.

Things are better because without FHA, people now have skin in the game, not to mention a better deal on their home, which in turn makes it easier for them to afford payments and dues.

As HOA President, I have to do the right thing that makes the complex better. And it's much better now in regards to the balance sheet, delinquency levels, and the quality of living. I can't simply vote to bring in FHA so that the sellers can move out of here at a higher price. It would be wrong to the homeowners who plan on living here.

If you can grasp this concept, then you understand the situation.
1 vote Thank Flag Link Fri Jul 8, 2011
J is absolutely right about these things.

If the government was not involved in the housing market, interest rates would be much higher...BUT home prices would also be much lower.

It is true that not having FHA will hurt home prices in the short/mid term. Is this a bad thing though? Well, for sellers it is. But remember: They're leaving and they don't have any interest in the future of the complex.

For buyers, not having FHA means that if you've saved up and don't rely an FHA loan, they can get the home for much cheaper. Having skin in the game is of much value to the association. It absolutely is.

The government needs to stop intervening with the invisible hand of the free market. Home values should be much lower, which would be good for people that want to buy into the housing market.

Government intervention is a burden on the economy. The founding fathers would absolutely agree with what I am saying. They were well aware of these things and were way ahead of their time.
1 vote Thank Flag Link Thu Jul 7, 2011
from hud.com
Why does FHA Mortgage Insurance exist?

Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer.


and when Congress started FHA I wonder who paid their salaries built their buildings etc etc etc
1 vote Thank Flag Link Fri Nov 12, 2010
I'm very well aware of the role of FHA.. Myself and the Board researched it and its requirements, many times. (or should I say, lack of requirements).

You're not really contributing anything to this conversation, Del .. and while making your lame joke, you spelled "grammar" incorrectly on top of it.

You obviously feel that the federal government should be insuring mortgages and keeping people buying homes, while they pay a premium to FHA on top of it.

My complex does not have FHA and people actually have to come up with a regular down payment. That's the way things are supposed to be... just because everyone else is doing something stupid, doesn't make it right. Just because the government is trying to manipulate home prices and get people buying when they shouldn't be, doesn't make it right. Ever heard of something called the Free Market?

You're just babbling hot air. FHA could very easily run out of insurance money if you look at how much risk they've taken on, and how much they have in reserves. But that's besides the point.

By the way, I do get "Thank you" letters all the time for cleaning up the complex. We're getting much better buyers in now - people that are responsible enough to save up for a down payment. Not those who can play with the houses money and walk away from a mortgage. (I've seen it all)

"With FHA, you can walk away!"
1 vote Thank Flag Link Thu Nov 11, 2010
One more potential answer to your question "Will we attract unsavory buyers". Since the economy has faltered a bit, would an FHA certification help those long term residents getting hit with layoffs, etc.. retain their property and keep the residents 'client base' status steady or have them short sale their property? I personally do not know, but I am looking at this as a 'pro' not a 'con'...
1 vote Thank Flag Link Wed Nov 10, 2010
Just a quick point, FHA allows 50% investor ratios. No single investor can own more than 10% of the units.


Steve Stenger
President
Condo Approval Professionals LLC
(847)293-2962
E-mail: steve@condo-approval.com
1 vote Thank Flag Link Wed Nov 10, 2010
My suggestion would not be to go it alone. The process and guidelines can be difficult to understand. Also, HUD has stated that they do not want buyers, sellers and realtors submitting projects.Simply because too many packages have been sent that are incomplete or the project is not eligible. I have rescued countless projects that were rejected because they were incomplete or ineligible. I am able to consult with these associations to give them guidance on how to become FHA approved.

Part of that is actually knowing whether or not your association is even eligible for FHA approval. My company, Condo Approval Professionals LLC, has over 16 years of experience in the area of condominium project approvals through FHA, VA, Fannie Mae, and Freddie Mac. We will prequalify your association for free so that you know whether or not you can become FHA approved. We would be glad to assist you and any others in this process.
I have been able to receive FHA approval on project ins as short as 1 week going to FHA. Please contact me if you want to know more.

Steve Stenger
President
Condo Approval Professionals LLC
(847)293-2962
E-mail: steve@condo-approval.com
1 vote Thank Flag Link Tue Nov 9, 2010
Edsicle - FHA does not charge for condominium approval.

FHA versus non-FHA aside, you'll have a larger pool of potential purchasers with FHA approval.

There is a new process in place for FHA condominium approval - I just submitted the paperwork to FHA this morning and have been told it takes about a month. I'm doing it as a courtesy to my borrower - you really don't need to be a lender just an interested party. Your HOA can submit the documentation. Visit HUD.gov for more information.
1 vote Thank Flag Link Tue Nov 9, 2010
First of all to president Joe. You sir, are an idiot. You don't have the facts straight. To go down the rabbit hole of your logic would be a waste of my time.

The entire question of " should we make our condo FHA approved " is all about supply and demand and the preservation of the value of your home.

Without FHA approval a seller excludes 51% of all buyers. There are many more homes on the market than there are buyers. Fewer buyers (demand) and more sellers ( supply) causes prices to decline. This is the market today. Making it much worse by excluding all FHA buyers (demand) will only cause the prices do decline further. This is economics 101

Readers, please read all the answers here to this question. The majority are not only positive towards getting FHA approval, the answers are much more intellegent than President Joe.

To all the condo owners who live in President Joe's complex, rise up and un-seat this guy. He is by his actions reducing your net worth. Worse, to those people in his complex that are not selling there home now, you will be in much worse shape when you decide to sell and buy elswhere becauses your home will have tanked worse than the one you will be buying.
1 vote Thank Flag Link Tue Nov 9, 2010
Stephanie,
When your buliding is FHA approved it makes it available to more buyers. If you are selling you want to have all available buyers able to make an offer and get your unit sold. One great thing about FHA loans that no one has told you about yet is that these loans are assumable for the next buyer if he/she qualifies to assume the loan. This is a great feature when interest rates are going up. This is a tremendous advantage when you are competing to sell your home and a buyer can blend your rate with the new rate to get a lower monthly payment. In this market, anyone can have life issues where they can't make the payment on their loan reguardless of the type of mortgage they have on the property.
Web Reference: http://www.garygeer.com
1 vote Thank Flag Link Sat Nov 6, 2010
Hello President Joe and Others:

First, please note that FHA loans are NOT serviced by the government, but are, like conventional loans, bank loans backed by the FHA. Conventional loans are backed either by FNMA or the Federal National Mortgage Association (aka "Fannie Mae") or the FHLMC or the Federal Housing Loan Mortgage Corporation (aka "Freddie Mac), but they too are serviced by a bank.

When one obtains an FHA loan, the buyer must still prove income, must still provide tax returns and other loan documents, must still have insurance, and must still show credit worthiness. The loan is provided by a bank and serviced by a bank. The only time that the the FHA or Fannie or Freddie, for that matter, becomes involved is when the bank note is sold, foreclosed or written down (as in a short sale). In these cases, the mortgage companies rely on the insurance provisions of the governmental agencies to cover a portion of the losses. No government agency is directly providing anyone with a loan, but, rather, the loan must meet certain provisions set up by the government in order to eventually qualify for backing by a loan agency.

Joe cites that government loans should be administered by the "free market." In fact, making this statement shows that Joe (like many others) is greatly misinformed or unfamiliar with the buying and loan process. The banks are free market and they alone determine if someone is credit worthy enough to obtain a loan. The banks will use guidelines set up by the government to determine which governmental agency will be likely to buy or guarantee the loan, but the decision to lend rests solely with the banker. In the past, their decisions were questionable, and, thus, we've seen the collapse within the financing sector that resulted in the devastating market correction. However, the government never steps in and says "Yes" or "No" to buyers--the banks do that, and you can't get more "free market" than that.

And banks DO want to service FHA loans. In fact, Bank of America and Wells Fargo Bank--two of the largest and most prolific mortgage bankers--both gladly provide FHA loans to qualified applicants. Again, it's not nor should be "free" money, and buyers must still qualify to obtain a loan, but there are many FHA buyers even today and they're not defaulting now.

Finally, for Edsicle, I'm sorry I did not see your email sooner. The HOA should not pay for FHA approval. Either this is paid for by the homeowner or the mortgage broker, but it is not the responsibility of the HOA to make itself FHA worthy for one member, especially when the community has so few units. Regarding your question about FHA foreclosures, I might say that ANY foreclosure is likely to have the results you cite--lower market pricing and this happens regardless of the entity guaranteeing the loan. Today, we're seeing many foreclosures in all income and home price ranges, and most are conventional loans, so the 20 percent downpayment does not guarantee that the home will not eventually be foreclosed. Foreclosures are a problem at all HOAs around the country, so if this is a problem facing many boards and homeowners.

Good luck!

Sincerely,
Grace Morioka
Area Pro Realty
1 vote Thank Flag Link Sat Nov 6, 2010
Yes you should make your condo FHA approved, with it being a Buyers market, buyers are not just looking into single family residence but condos as their first home. FHA is a loan that is offered to first time buyers who usualy live in their first home for an average of 5years before they move on.....ultimately you will attract Buyers interested in your community which will give that unit home owner options on offers he will receive.

Stepanie, It sounds like this is a great opportunity for you to get one of your friends or family members to move into your complex. Wouldnt it be nice to pick your new neighbor or at least have the chance to?

Call my celly 323-336-5640 or email me directly NancyGalarza@realtyexecutives.com
1 vote Thank Flag Link Sun Oct 24, 2010
Yes you should make your condo FHA approved, with it being a Buyers market, buyers are not just looking into single family residence but condos as their first home. FHA is a loan that is offered to first time buyers who usualy live in their first home for an average of 5years before they move on.....ultimately you will attract Buyers interested in your community which will give that unit home owner options on offers he will receive.

Stepanie, It sounds like this is a great opportunity for you to get one of your friends or family members to move into your complex. Wouldnt it be nice to pick your new neighbor or at least have the chance to?

Call my celly 323-336-5640 or email me directly NancyGalarza@realtyexecutives.com
1 vote Thank Flag Link Sun Oct 24, 2010
I am a realtor and trying to find a condo for my buyer, with great credit but many complexes are not approved. We found a complex, but the hoa has a high rate of delinquencies of the hoa fee. Please rememeber the complex I am refering to has over 65% owner occupied complex. Earlier this year I purchased a unit for a buyer and the hoa made my buyer pay for the delinquent bill from the previous owner. Getting a complex fha approved is not as easy as it once was because many complex don't meet certain standards.
1 vote Thank Flag Link Tue Aug 24, 2010
J you never answered my question...what do you do?
1 vote Thank Flag Link Thu Aug 19, 2010
J what do you do for a living?
1 vote Thank Flag Link Fri Aug 13, 2010
I would agree that having FHA approval can only help you get more qualified buyers.
1 vote Thank Flag Link Wed Jun 23, 2010
1. It's better to have a rented unit in which the dues are being paid, rather than an owner with bad credit who is defaulting on his mortgage and owes thousands in HOA dues....who probably also decides to rent his unit as well.

2. CC&Rs and Condo Rules do apply to renters - so they are kept in check.

Sure, it's not better to have owned units than rented units, we all know that. We don't live in a perfect world though, and it's going to happen regardless.

FHA is still handing out mortgages to people who shouldn't be getting mortgages. If you have no money to put down, you shouldn't be in a home.

Why does our government have to be insuring mortgages when our own banks won't even give these people loans?
1 vote Thank Flag Link Wed Mar 10, 2010
FHA is much more popular than you might think- especially for condos in Chicago. I actually bought my condo in River North via FHA because the market is very soft and rather than tie up my money in an asset that is not going to appreciate for a while I wanted to keep it available for other investments with a much better return.

Other people go FHA and put down significant down payments and their reason for using FHA is simply because they have a slightly lower credit score than they needed to qualify conventionally.

The bottom line is that getting a loan in today's economy and for the most part moving forward is going to be a difficult task so if someone qualifies to buy at all they are in a good position financially.

Lastly keep in mind FHA loans don't go up very high in terms of loan amount so- not that I'm justifying or agreeing with your concerns in any way- even if your concerns were valid if your building is above a certain price point it's a non-issue because no one will use FHA anyways.

FHA is a great way to make your building more attractive to a wider range of buyers if your values are in range and that is essential in this market and in my opinion increases value.

Consider yourself lucky if you have the ability to get your building FHA approved and be thankful if an FHA approved buyer comes along and pays fair market value because the alternative- foreclosure or short sale both of which could destroy everyone's values- is much worse and an all to real possibility!
1 vote Thank Flag Link Fri Feb 12, 2010
The truth is sometimes rude

But lies are worse

good job joe
I'm voting for ya
1 vote Thank Flag Link Wed Feb 3, 2010
Thank you, Linda. My sentiments exactly. Regarding the OFF button for Joe - don't think it's doable. I responded to his rudeness back in October (comments below Oct.3,) when he stated: "If these applicants don't meet the conventional lending standards of a down payment, then they shouldn't be buying...and thankfully, they aren't in my complex." His answer to my comments are also below. Needless to say, that was my last answer until this. I think that talking to Joe about the "positives" of FHA Approval is like - oh - beating a dead horse..... So I just continue to read the answers as they come and watch everyone go back and forth and around the same old mountain. I won't go thru "my story" again (you're welcome, Joe) - but I'm an FHA'er and not unsavory OR a irresponsible (Joe's terms).... thank you. Oh, and still thankful that I'm not in Joe's complex.

Ya'll have a great day!
1 vote Thank Flag Link Wed Feb 3, 2010
Myrna, you are confused.

1. Government interference and the securitization of mortgages was the root cause of the housing bubble, not FHA. (NAR's cheerleading didn't help either)

2. I haven't made mention of VA loans, so don't go off topic with that.

3. Yes, we already know how many conventional loans defaulted. There was a real estate bubble. Refer to point #1 as to why.

4. FHA is simply another irresponsible government program that gets too many people to own homes they should be saving up for instead.

If banks won't lend to people without a down payment and take that risk, then why is our government making such a bad business decision in doing so?

Answer: Politics
1 vote Thank Flag Link Wed Feb 3, 2010
First of all, just three years ago FHA Insured Loans comprised just 1.7% of all Mortgages. Now they represent 52% of all mortgages ! FHA, has a default rate of just 1% compared to 5% of conventional loans! You tell me if these Fully documented Loans are bad??
The smart Condo Association should do what ever it takes to get their project approved!
You can find out more at http://www.checkfhaapproval.com this sight verifys approval, eligability and helps MGMT CO get their properties approved.
erohn@checkfhaapproval.com
1 vote Thank Flag Link Wed Feb 3, 2010
WoW... Really surprised at some of these answer. I would like to remind everyone that it wasn't long ago that everyone did 100% whether they could afford it or not.... And, guess what? Many could not so here we sit today with a completely horror story. At least with FHA, they have to come up with something. How many people live there now that came in with 0 down? Case closed!!!
1 vote Thank Flag Link Wed Feb 3, 2010
To those in favor of FHA lending who dont get it:

Its NOT JUST ABOUT what the failure rate is, on why many DO NOT want FHA to occupy their "investment" or where they want to reside in peace and quiet

Its that people who are subsidized or paid in full via taxpayer/government assistance are more likely to not take care of a place as well, or might have friends that are of a dubious nature

So a person who has a lower standard to qualify can also fall into a category where they personally have less to lose if they have to leave for whatever reasons

ANY GOVERNMENT PROGRAM WILL ALWAYS HAVE A STINK TO IT

Thats one of the reasons its impossible to find out who is getting our money to buy homes etc

IF ITS OUR MONEY WE SHOULD KNOW BUT THATS NOT GOING TO HAPPEN in a corrupt system
1 vote Thank Flag Link Thu Sep 17, 2009
I am so frustrated with a condo complex in Mukilteo, Washington called the Hamptons. The sellers values are dropping like flies because the property managment company is not pushing the hoa to move towards compliance. These are entry level condos in a very desirable area/. Who wants to list the impossible properties. Not me. I have already lost one listing, and I have another seller begging me to list the property. I have called all other listing agents with properties in the complex to write a letter from all of us stating our concerns for the home values. This is tough market anywhere you live, and we are considered on of the better markets and its not great.. HOA's wise up do the math.. My market yourself right out of an entire buyer pool in FHA and VA...
1 vote Thank Flag Link Mon Jun 9, 2008
Is there a layer who can help you?
0 votes Thank Flag Link Tue Jun 12, 2012
Nice try

No one is associating the amount of money with a person(s) character

Its that ANY GOVERNMENT PROGRAM is open to more fraud and crime because the incentives are at a different level

ANYTHING THAT GIVES MILITARY PERSONNEL A BREAK , WHILE IT DOESNT DIMINISH OR ENHANCE A PERSONS CHARACTER is more acceptable since we asked or DEMANDED THAT PERSON LAY DOWN THEIR LIVES

Government programs prove over and over again that the foundation and basis for taxpayer giveaways might sound good etc but have proven to be nothing short of disasters.

And thats for the people who lack the commonsense who understand what happens when you dont follow the tried and true:

give a person fish they eat today teach them they eat forever

Paying people off so they wont rob riot or murder has never ever worked

Let the charities/religious organizations do their self appointed job and take care of people...

Just because its easier to make laws to redistribute wealth doesnt make it right

it means its just a bad law


as a realtor or seller your goals are different than those who still will reside in a place

you want to social engineer?


have more children

dont mess with ours
0 votes Thank Flag Link Fri Dec 16, 2011
Having your complex FHA approved will open up the Buyer "pool" for this property. This just gives a buyer different choices on financing. In my professional opinion, this is a good thing. Most first time home buyers get into something smaller like a condo first before making the step to a home so this would make it easier and in the long run make the units in the association more marketable over others that are not FHA approved . Just because you could finance it with 3.5% down, doesn't mean that you would attract unsavory buyers, at least not in my professioanl opinion. The lending market has tightened up and if a buyer is qualified, that's the best thing. How much money they put down has nothing to do with being unsavory. Va Buyers have the opportunity to put 0% down but that doesn't make them any unsavory, quite the contrary. If you don't have to put a lot of money down, why would you want to. I am a realtor in New Hampshire and would definitely advise my seller client the same as the other realtor.
0 votes Thank Flag Link Fri Dec 16, 2011
Mary and Tim ( part2)

AS far as the correlation between FHA and unsavory and good credit people not having the 20% to put down

Who requires the 20%???

The seller?

The bank?

The % to be put down should be a DECISION SOLEY IN THE HANDS OF THE SELLER / LENDER

AS far as "unsavory"

Like anything else some are good some are bad

That really wouldnt come into play if the government was not involved

If you were not sure BEFORE 2008 whether gov involvement was good or bad

THERE CAN BE NO DOUBT ANYMORE HOW GOV INTERFERENCE ( from the CRA that helped to ignite our housing problems etc)

like cash for clunkers and the multitude of HOUSING BAIL OUTS HAS NOT ONLY DESTROYED OUR ECONOMY

BUT IN FACT IS PROLONGING OUR RECOVERY
0 votes Thank Flag Link Tue Oct 18, 2011
Mary and Tim

You help make the case against FHA

You said the decline in prices due to non acceptance of FHA

That is proof AGAIN, that GOVERNMENT INTERFERENCE corrupts the true value

While that would cause commissions to ( possibly be less) as a buyer and seller ( sellers also become buyers when they sell) the FAIRNESS IS MORE IMPORTANT and to a further extent

by not having FHA HUD SECTION 8 ETC NOT ONLY WOULD THE MARKET BE FAIRLY PRICED but then the government YES OUR GOVERNMENT WOULD BE ABLE TO JUDGE IN A FAIR AND UNBIASED MANNER when the case would arise

which of course it does on a daily basis
0 votes Thank Flag Link Tue Oct 18, 2011
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