The FHA recently began implementing previously proposed changes to its guidelines governing government-insured mortgage financing for condominiums. Among these new FHA mandates is a requirement that condo associations carry large capital reserves. Many finance experts are predicting that most mortgage lenders will incorporate similar requirements into their own underwriting guidelines, making the new prerequisites almost universal among the majority of non-portfolio lenders in the United States.
Older condo communities across the country may find it difficult to comply with these new capital reserve requirements.
Many condo associations and unit owners appear unaware of the new capital reserve requirements and what failing to comply with them may entail for owners at non-compliant communities. Condo unit owners in non-compliant communities may encounter severe trouble refinancing or selling their units.
FHA insures low-down-payment loans
Among many other functions and services, the FHA offers mortgage insurance for condominium mortgage loans. These insured loans are important to the marketability of many condo communities because they allow buyers to obtain financing with very low down payments.
Condominium communities must be approved by the FHA
The FHA has to “approve” a condominium community before it will insure mortgage loans in that development.
If your condo community is not on the current approved list, the FHA will not insure mortgage loans there until it becomes an approved condo community.
Approvals last for a set time then have to be renewed. The FHA has granted extra time for condo associations to prove compliance with the new guidelines, but the clock is ticking.
So even if your condo community was approved under the old set of rules, it is likely facing the need to confirm its approved status in light of the new guidelines.
If not approved, condos face problems refinancing or selling
If you own a condo unit in a condo community that is not compliant with the new FHA requirements, you may soon have a hard time finding a lender willing to refinance your current mortgage loan unless you have substantial equity.
And when you attempt to sell your condo unit in a non-FHA-compliant condo community, many mortgage lenders may not want to finance the sale of your unit if your buyer lacks at least a 20% down payment. You may be limited to selling your unit only to buyers with substantial down payments. This will greatly lessen your ability to sell your home.
10% of income to capital reserves
A full description of all the changes to the FHA condo guidelines is beyond the scope of this post. But they all must be complied with to maintain your condo’s approval. The link below leads to good background on the new FHA condo approval guidelines and how to prove compliance; it’s a very detailed review designed for mortgage lenders but does cover all aspects of the approval process:
One of the most problematic of the new requirements is the new requirement that every condominium association must allocate at least 10% of its income to a capital reserve account and have adequate funds budgeted for casualty insurance deductibles.
Many older condominium associations will find themselves struggling to comply with these new budgetary mandates.
Time-consuming amendments to the governing condo association documents may be needed. Condo fees may have to be raised and/or special assessments may be needed to fund the FHA’s capital reserve requirement.
Is your condo community currently approved?
You can use the next link to check whether your condo community is currently on the approved list:
If you are unsure of the legal name of your condo community, just enter your state and zip code to see the list of all condo communities the FHA has approved in that zip code.
If your condo community meets the new FHA requirements
If your condo community is compliant with the new guidelines but has not yet formally proved this to the FHA, getting onto the new FHA approved list is just a matter of your association’s gathering the supporting facts and applying to the FHA. This is called “HRAP” approval. Beware that approval by the FHA may take months, given recent reports of backlogs.
As an alternative, some mortgage lenders have the authority to handle the approval process themselves as part of their making a purchase money loan for a unit at a condo community. This is called “DELRAP” approval.
If you condo community does not meet the new FHA requirements
The rub comes when a condo community does not comply with the new FHA requirements.
Some unit owners may balk at the increased payments that may be needed to bulk up their association’s capital reserve fund. Many owners could face financial hardship coming up with the funds needed. This could become a real problem at many under-capitalized condominium communities in coming months.
What to do
Condo associations and their unit owners would be wise to take the initiative to find out where they stand in light of the new FHA approval guidelines. Don’t wait until problems with attempted refinancings or unit sales crop up.
If you are thinking of buying a condo, by all means check immediately to see if the condo community has already proven compliance with the new FHA guidelines.
If the condo community you want to buy in still has yet to become approved under the new guidelines, ask about the sufficiency of the capital reserves before you commit to the purchase of any unit.
Copyright ©2011 02038.com
You get more with Warren Reynolds than you do with other top real estate agents. You’ll find in Warren rare knowledge and experience dedicated to helping you achieve all the value that home brings. Warren has a law degree and 20+ years of home selling success in Massachusetts. — talk with Warren today! 508-561-6259
"We have now bought and sold five homes. By far, you have been the best realtor we have worked with. Your professionalism and knowledge are so valuable to your clients. You made this process so easy. "-CB
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Warren is a highly dedicated professional in all his real estate dealings. That means he will continue to serve you well, even when others would compromise on their commitments. Warren’s ultimate goals in business are better transactions and greater client satisfaction. Talk with Warren today! 508-561-6259
"As first time homebuyers we were fortunate to work with Warren. He was a great asset and sounding board. He always gave solid advice. Warren played a pivotal role in helping us negotiate with a difficult seller. We truly benefitted from having Warren in our corner and so will you." -JK
Maximize your home selling success.
All real estate agents are legally and ethically bound to be fiduciaries acting in their client’s best interests. His name stands for integrity and he takes his fiduciary duties to you very seriously. He’ll steadfastly put your interests first throughout your home purchase or sale – talk with Warren today! 508-561-6259
"Warren was always there for us. Throughout the process, Warren kept on top of all our concerns. Warren worked for us, and looked out for our best interest. He is a very professional and caring person." - BP
Feel safe and well taken care of.
Warren is a highly dedicated professional in all his real estate dealings. That means he will continue to serve you well, even when others would compromise on their commitments. Warren’s ultimate goals in business are better transactions and greater client satisfaction. His devotion to excellence can demonstrably improve your home buying and selling decision-making and, consequently, your experience of home ownership. Warren constantly stays current on the local housing inventory. And he is conversant with the broader market trends that affect home sales statewide link to Market Updates. Warren knows that the market knowledge he works so hard to maintain and his high standards of real estate practice help him achieve for you the lasting, true value of home ownership. Talk with Warren today! 508-561-6259
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Did you know you can materially improve your home selling success by choosing your marketing agent and brokerage brand wisely? It’s true! A marketing agent with a sterling reputation, backed by a strong brokerage brand, will do wonders for the reception your home gets upon entry to market. Warren is known in the local brokerage community as a dependable, highly skilled professional who is a straight-shooter. Other agents like working with Warren because they know they can trust him to be a reliable partner in any transaction. And the Berkshire Hathaway HomeServices brand stands for sound decisions and extraordinary strength and stability. The “Forever Brand” brokerage created by Warren Buffet sets the standard for the real estate industry by focusing not on selling more homes, but rather on selling homes for more!Call Warren today! 508-561-6259
"As first time homebuyers we were fortunate to work with Warren. He was a great asset and sounding board. He always gave solid advice. Warren played a pivotal role in helping us negotiate with a difficult seller. We truly benefitted from having Warren in our corner and so will you." -JK
Maximize your home selling success.
Not only is Warren highly skilled and dedicated to protecting your best interests, he will be highly responsive to your needs! He CARES about his clients and is always, always there for them. In person, by phone, email or text, whenever you need him, you’ll get a prompt response from Warren! Warren’s clients rave about the high degree of consideration and attention they get from him. Why not give it a try? Contact Warren now and see how well he takes care of you! – talk with Warren today! 508-561-6259
"I had many, many questions which Warren was always more than willing to answer with a never ending patience. Throughout the process Warren looked out for my best interest. I may have purchased a garden style condo but Warren treated me like I was purchasing a million dollar estate!" -MP
Get the attention you deserve.
Warren is a very creative real estate practitioner and he uses that creativity in ways that provide important advantages to clients. Creatively runs in Warren’s family! His uncle was Harnett T. Kane, an internationally-recognized investigative journalist and New York Times best-selling author of thirty books about the American South. Warren employs his own creativity by producing compelling marketing, both in print and especially online! His www.02038.com, is a highly effective website promoting the wonderful lifestyle afforded by the Town of Franklin, MA. And his Market Updates content on Massachusetts real estate trends gives home buyers and sellers alike the context they need to make more informed decisions about their housing investments. Warren frequently uses his abilities to devise resourceful solutions to the diverse challenges that threaten to complicate most real estate transactions. Warren has made real estate his career and won many sales awards in his 20+ years in brokerage, including the highly prestigious Chairman’s Circle Gold Award and the elite Centurion Award. Experience Warren’s refreshing difference today! 508-561-6259
"Your creative approach to all aspects of my move helped make the transition easy and pleasurable. You were recommended to me by a friend who appreciated your integrity, expertise, friendliness and conscientiousness - qualities that I have witnessed in abundance as we've worked together." -KB
Get creative with Warren.
You get more with Warren Reynolds than you do with other top real estate agents. You’ll find in Warren rare knowledge and experience dedicated to helping you achieve all the value that home brings. Warren has a law degree and 20+ years of home selling success in Massachusetts. His legal knowledge and decades-long experience in putting — and keeping — real estate sales together give him a better handle on the legal, practical and emotional dynamics of the real estate transaction. Warren uses these skills to empower clients to achieve more! He often anticipates and resolves problems BEFORE they can become serious impediments. Enjoy the sense of trust, security and control that comes from having a highly skilled expert at your side — talk with Warren today! 508-561-6259
"We have now bought and sold five homes. By far, you have been the best realtor we have worked with. Your professionalism and knowledge are so valuable to your clients. You made this process so easy. "-CB
Make better decisions and feel in control.
All real estate agents are legally and ethically bound to be fiduciaries acting in their client’s best interests. But many agents give their fiduciary duties short shrift in their quest for the quickest and easiest path to a closing. Not Warren Reynolds! His name stands for integrity and he takes his fiduciary duties to you very seriously. He’ll steadfastly put your interests first throughout your home purchase or sale. This may make Warren work longer and harder for you than most other agents would. But ultimately, Warren’s diligence and attention to detail is his commitment to an experience that transcends the sale. He wants you to have the confidence and peace of mind that comes with having a true fiduciary protecting you. Discover the difference of working with an agent who does not view you as just another opportunity for a commission – talk with Warren today! 508-561-6259
"Warren was always there for us. Throughout the process, Warren kept on top of all our concerns. Warren worked for us, and looked out for our best interest. He is a very professional and caring person." - BP
Feel safe and well taken care of.