I think we have finally seen it all when it comes to financing residential Real Estate. We have seen so many programs go away and our government now finances or insures about 95% of all loans for residential home-buyers. The problem is the government has rules that we must adhere to so a property can be financed.
FHA is a great way for buyers to get into a home with just 3.5% down and 50% of the buyers that come through our office are FHA buyers. Unfortunately FHA requires attached Condominium complexes to approved prior to financing any of the units in a complex.
If a condominium project is FHA approved then the property values tend to be 15%-20% higher than a complex that is not FHA approved. This doesn't sound that great for the buyer, but it is great for the people that live in the complex and it also allows potential buyers to get into the complex. If you buy a house in a complex that is FHA approved and that complex loses its ability to do FHA financing then the value will go down and it will go down quickly.
So you are probably wondering why don't people just get conventional financing when they purchase a condo? The answer to that question is simple. You can qualify for 28% more house when you finance using FHA guidelines vs. getting a conventional loan. So if you qualify for a $300,000.00 condo with FHA financing then you will only qualify for a $216,000.00 condo on a conventional loan. You will also need a 5% down payment from your own "seasoned" funds where FHA allows you to get a gift for the full 3.5% down payment. FHA is also much more flexible when your credit is not perfect and a conventional loan requires excellent credit when you only put down 5%.
In conclusion, if you want to save the complex that you live in then please call, email or fax your management company, HOA President, or any of the officers and let everyone in the complex know that it is very important to help your complex get FHA approved!
About 40% of the approved complexes in the Santa Clarita Valley lost their FHA approvals on June 1st 2011 because the management companies didn't file the proper paperwork. There is another large amount that will expire on August 1st. Please speak out if you want to save the equity you have in your home!