For a while now FHA loans have represented the best option for first time home buyers.  With the lowest down payment required in the industry (3.5%) and greater flexibility on qualifying and source of funds for closing, they are nearly all I see with first time buyers right now.  First time buyers are also far more likely to purchase condominiums, so the news that the FHA approval process has changed is big.

As things stand right now, if you are shopping for a condo and have been approved for an FHA loan, you have two choices.  Find an FHA approved complex to purchase in, or find a condo you like and ask the association to complete a spot approval.  The spot approval is basically a checklist to indicate the economic health of the complex and association.  If certain criteria are met, the loan goes through just fine.  If there are problems, you will need to keep shopping.

The rules however will change as of October.  The spot approval will no longer be an option.  That means that if you have an FHA approval you will not be able to purchase in a not FHA approved complex.  This is a big deal because very few condo complexes are FHA approved.

So if you have been approved for an FHA loan you will have the following options:

1.  Only shop in FHA complexes – This is an enormous pain because very few complexes are approved.

2.  Give up on the condo idea and buy a house – This means you will most likely have to settle for a much smaller home and may not be able to get into the neighborhood you want.

3. Buy before October.  The rules don’t change until then.  We can still get a spot approval so long as the condo closes.

If you currently live in a condo complex that is not FHA approved, start lobbying the association to get approval now!  It will make it much easier to sell you home at a later date if it is FHA approved.  Those that do not have FHA approval will be at a real loss.  That means longer times in general to sell and for generally less money. 

If you want help finding a condo, give me a call.  I love shopping with condo buyers.

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Rob Graham, Accredited Buyers Representative

Windermere Real Estate

206-321-6349

robgraham@windermere.com

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