Buying A Condo – FHA Mortgage Pitfalls

When it comes to buying a condo with a FHA mortgage, watch out for the pitfalls .  In today’s quickly moving real estate market, there is one hazard you need to watch out for, FHA approval.  We are not talking about if you quality for the loan but does the condo building qualify?  Here is a post with some more information on FHA approval and search.

Many condominiums have left their FHA status expire without being re-certified which leads to many purchasers having to put down at least 20% down payment versus the 3.5% required by FHA.  Here is where the problems start.  If as a seller, you have less buyers looking at your condo because they don’t have the 20% down, you will not have the maximum amount of interest or sales price.  If this happens over and over again, property values will decline in your building.  If the property values decline, many people looking to sell or refinance can’t so some will go into a short sale if foreclosure situation.  Typically when that happens, homeowners stop paying condo dues which is one of the triggers for FHA approval.

For FHA approval, there will be focus on budgets, insurance, financial reserves and delinquent condo dues, just to mention a few.  In instances where we have FHA buyers and there is interest in a non-approved condominium, we must work as a team.  Buyers, sellers, management companies, condo boards, buyer’s agent, listing agent and lenders all have to work together to pull of the best outcome, a successful sale.

If you are looking to buy a home, make sure you start in the right direction, check out our Buying A Home page.

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