It seems like realtors seem to shy away from FHA loans. Why is that?

Asked by Eler1926, Hayward, CA Tue Mar 13, 2012

I have a pre-qual letter from Chase and it is for an FHA loan. I am looking for a condo in the Hayward , CA area. I just can't seem to find a realtor who wants to work with me. I also work for a termite company and my boss has offered to complete any section 1 & section 2 items needed.

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Claudia Mull…, Mortgage Broker Or Lender, Fremont, CA
Fri Mar 16, 2012
In order to obtain FHA financing, a condo must be FHA approved.

PUDs, however, which often times look and feel like a condo do not need to be FHA approved.

The legal description on a property specifically states if the property is a condo or not.

Have your agent or loan agent look at the legal description of the property prior to showing it to you. It is a very simple search on a title company resource that take about 2 minutes max. This would save tons of time in the car!

Any agent worth working with wont snub you...because they know what they are doing!!
1 vote
Chris Schill…, Agent, Houston, TX
Tue Mar 13, 2012
Realtors used to shy away from these loans. Goverment backed loans (FHA, VA, USDA) all used to take longer than a conventional loan and had fees that the seller would have to pay that were more than what they would have to pay as a seller with a conventional mortgage. But the times, they are a changing! Now these loans are competitive in fees and rates and allow buyers to buy a home with as little as 3.5%. Agents should be thrilled to see you come to their listing with your magic pre-qualification letter!

Good luck on your home search!


Chris Schilling
Turbo Realty
1 vote
Michael Emery, , Minneapolis, MN
Tue Mar 13, 2012
Realtors aren't afraid of FHA loans - except when it comes to condos.

Too often condo developments don't meet the criteria for FHA loans and if you found one that you like, using FHA can sometimes limit your ability to buy.

And even when a condo development is FHA approved as of (example) March 13th 2012, their FHA approval can expire on March 14th 2012 and you end up starting all over again.

Until more condo developers and HOA's work harder to get FHA approval, or until the underwriting standards are relaxed, buying and selling condos using FHA is going to continue to give heartburn for agents.
1 vote
George Raymo…, Mortgage Broker Or Lender, Fort Worth, TX
Fri Mar 16, 2012
That terrible!

Here's a tip for you on how to increase your chances for picking up that Condo. If you are working with an experienced Loan Officer, they should have offered you a couple different loan options. As stated below, FHA requires that the Project to be HUD approved based on the owner-occupancy percentage and delinquency factor which can certainly limit your choices.

I offer my buyers two alternative options for Condos. If you have 20% down and it's an Un-Warrantable Condo, I have an investor who buys these loans with little or no struggle. If you only have 3% down, I offer buyers the FNMA Homepath Loan Program. This program can offer a buyer many advantages in their search for a Condo.

First the Condo does NOT need to be FHA/HUD approved. There is no monthly mortgage insurance and no upfront MIP like FHA. The rates are a little higher, but they are still in the 4's. One more advantage, we require NO Appraisal and better yet we can close in 18 days. This alone can make a HUGE difference to a seller and specifically for those Agents who don't want to work with you. For more information, read my article by clicking on the link below.

Best of Luck!
0 votes
Alain Picard, Agent, Puyallup, WA
Wed Mar 14, 2012
Probably the fact that you're looking for a condo. FHA loans and condos these days are difficult sometimes. A lot of condos don't qualify for FHA for different reasons. The top two that I see out here are to many units currently rented out (not owner occupied) and to many units behind on their HOA dues.
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Brian LeBars, Mortgage Broker Or Lender, Pleasanton, CA
Wed Mar 14, 2012
I have a great Realtor in the Hayward area that UNDERSTANDS FHA loans. I would be happy to introduce you anytime. email me if interested.
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Lance King, Agent, San Francisco, CA
Wed Mar 14, 2012
FHA loans for condos can be problematic for several reasons. The main one, as outlined below, is that the project has to be FHA approved and if it isn't approved already the process for getting approval is long and tedious as there are no more "spot approvals."

Another reason is that when you are in a competitive offer situation, all else being equal you are almost always going to lose against someone with more money down.

That said, I'm surprised you can't find anyone to help unless everything you might be interested in are in smaller buildings that will need approval. Generally speaking new projects get FHA approval these days so you will have an easier time buying those, but there are tradeoffs - larger buildings generally have higher HOAs and can be tougher on resale.

Here is a link to find approved projects. You don't need to fill in all fields, and you can search by entire city or zip code or name, etc... This will show you FHA approved projects so you can know going in if they are or not.

I would post here again in hayward asking for someone to help you. You will be more informed on the process and perhaps have an easier time. You can also use the find a pro tool here as well.

Best Regards,

Lance King/Owner-Managing Broker
DRE# 01384425
0 votes
James Gordon…, Agent, Hamilton, OH
Wed Mar 14, 2012
I love FHA loans. I hate it when people want to buy a condo with an FHA loan. Not only does the community have to be currently approved butthere nneds to be an update letter before closing. One of things that they look for on the update is the percentage of units paying their monthly HOA fees late. In my area there is a suburb that has over 100 condominium communities. There are 8 that are FHA approved.
For an update letter lets say that you are making an offer on a forclosed property in a 10 unit complex. The forclosed property has not been paying the HOA fee. If one home owner is late that month FHA will deny the loan even if it is an FHA forclosure because of the percentage of units paying late.
0 votes
Tina Lam, Agent, San Jose, CA
Wed Mar 14, 2012
The fact that not all condo complexes are FHA approved is a common reason. In practice, even if you can find an approved complex, having an FHA loan just means that you'll have to be prepared to put up high bids against offers with conventional financing or even all cash buyers/investors. If you communicate that willingness to a Realtor, then I'm sure you'll get plenty of interest.
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John Bender, Agent, Corona, CA
Wed Mar 14, 2012
There is nothing wrong with using an FHA loan for a condo. The community does need to be HUD approved and even then you may have issues that have developed within the HOA that might prevent you from closing (ie: litigation, delinquencies, etc.)

However, a 5% conventional loan with PMI is generally a better bet than FHA. If you're adamant about going FHA, or if you have a particular scenario that requires FHA financing, have your lender pull a case number for you so that you can get grandfathered into the current upfront and annual MI rates...they both are going up the first part of April. Your case number will be good for 180 days.
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Grace Hanamo…, Agent, Cupertino, CA
Tue Mar 13, 2012
Hi Eler and thanks for your post.

I think my pal, Pacita, said it best--Realtors are not shying away from FHA loan, but rather we all know that FHA and condos don't always "play well" together. In fact, FHA has such stringent guidelines for condo approvals that most of the condominiums don't qualify for a purchase made by a buyer who must use FHA. Couple this with economic downturns that have increased foreclosures, delinquencies and bankruptcies in many HOAs, and it can be impossible to obtain favorable financing for most condominiums.

Your most successful purchases are likely to be with brand new home projects where mortgage companies have qualified the homes for FHA financing or small homes that are NOT part of a homeowners association and NOT part attached to other homes.

And if you really would like to buy a condominium, look them up on the two sites that Pacita suggested. Pacita is a terrific agent in the East Bay, and I know she doesn't "shy" easily from any financing vehicle. Use a good agent, and you should be able to find a great home soon!

Good luck!

Grace Morioka
Area Pro Realty
0 votes
Pacita Dimac…, Agent, Oakland, CA
Tue Mar 13, 2012
It may not be that realtors shy away from FHA, but rather it's because not all condo projects are FHA approved. If you're set on getting a condo, here's a place where you can look to see if the condo you're interested in is FHA approved

And here's a good place to look for FHA loan guidelines

Because FHA has strict guidelines, some properties may not pass or qualify for loans. Therefore, you should also check with your lender about FHA 203K loans

So....what is your budget range, and what is on your must-have list. Are your requirements within your budget range realistic?
0 votes
Ron Thomas, Agent, Fresno, CA
Tue Mar 13, 2012
FHA has a bunch of drawbacks, and they just got worse:
The Interest Rate is usually higher.
Last week, they anounced that the up-front fees have been increase; you will probably have to pay them.

If you want more more information and a great Realtor to-boot,
please call my Broker; Mike Rowland at 510-222-9150 or e-mail him at

Good luck and may God bless
0 votes
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