More Condo Transactions Possible
Courtesy of Recent HUD/FHA Changes
Today's homebuyers are increasingly reflective of the reality of modern life and its challenges ...
As shared in my recent post, "Mortgage Advice & Options for Un-Married Couples", non-traditional methods of home buying are becoming (often out of necessity) more common and popular, especially among younger homebuyers.
- Home Affordability
- Family Structure
- Student Loans
... are motivating buyers to seek home buying solutions beyond those utilized most frequently in the past.
One such solution historically popular with young buyers and those downsizing has been the purchase of a Condominium. Condos are often seen as the perfect fit for their finances, needs, and lifestyle.
Oftentimes these very same buyers, if borrowing, find the Federal Housing Administration (FHA) financing an advantageous route to purchasing their condominium. And here's why:
- Down Payment: The minimum down payment for FHA loans is 3.5%
- Type of Down Payment: FHA Allows Borrowers to receive gift funds from Family Members (and in some cases, other ways as well)
- Credit Scores: FHA allows Credit Scores well below Conventional Loan Requirements
- Credit Histories: FHA allows minimal, fair, and sometimes no-credit Borrowers to qualify, pending other factors
- Co-Signing Borrowers: With an FHA loan, Non-occupying Borrowers (typically relatives) can be introduced as Borrowers to assist in income or credit support for the Primary Borrower
- Employment History: FHA is the most forgiving Loan Product regarding job tenure, job stability, length of employment, how income is received, etc.
- Interest Rates: FHA loans typically run lower than Conventional Loans, when all else is equal
Until recently, restrictions placed by the Dept. of Housing and Urban Development (HUD) on condominiums have proven to be a deterrent to many condominium purchases. I've written multiple articles addressing this specific financing challenge in the past.
But relief from some of these restrictions arrived on October 15, 2019, as HUD Form-9991 was developed.
Why is this so important to buyers and sellers?
HUD Mortgagee Letter 2019-13 and Form-9991, speak to an SUA ... a Single Unit Approval. Form-9991 provides Mortgage Lenders the ability to request HUD approval on an individual Condo Unit ... as stated above, something disallowed in the recent past.
For buyers: The revisions made possible via HUD Form-9991 and approval via the Single Unit Approval Process will enable FHA insurance of individual Condo units, even if the condominium project as a whole does not have a current FHA approval. (The property must, however, fall within the requirements stated by FHA/HUD.)
For Sellers: Sellers may find the incentive they need to attract new condo buyers, that otherwise may have been shut out of buying with FHA Financing.
Another positive feature of HUD Form-9991 is:
- Revisions will also provide additional flexibility in ratios, specifically the ratio of Investors to Owner-Occupants.
- This will allow for the possibility of FHA financing in more Condo buildings.
HUD/FHA has now realized that just because a Condominium Association had not completed the tasks required to get an Approval for the entire complex, did not mean that making a loan (or insuring a loan) on select/qualifying units, was a risky proposition.
With the completion and submission to FHA of a fact-finding form (FHA Condominium Loan Level/ U.S. Department of Housing Single-Unit Approval and Urban Development Questionnaire), a Lender will then acknowledge that FHA has approved the single-unit approval process with issuance of an FHA Case Number.
This procedure (completed by the Mortgage Lender) is known as the Case Number Assignment Process. Upon its completion and issuance, an Appraisal can then be ordered and the mortgage loan processed for Loan Approval.
Having recently closed multiple loans utilizing this process, we have learned that this new process and system can work and prove very beneficial to my home buyers.
It's been a great way for my entry-level buyers to become Condo owners. This has been accomplished without Mortgage Lenders ... or FHA/HUD ... taking additional or unnecessary risks. Ultimately that positively influences future actions by both.
It's easy to start this condo-buying financing process. As your Chicagoland - IL/WI Mortgage Originator, I can help.
Via a brief fact-finding conversation, I will gain the important information needed to understand the Condo Association's make-up and financial standing. This will help start the process to successfully put your transaction and its financing together ... a transaction that prior to the passing of Hud Form-9991 might have been impossible. It may also enhance and broaden the housing that can be considered during your home search.
* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicago - Chicagoland - IL/WI?
Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf.
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