The idea is fabulous. Find a place that takes care of the outside maintenance, the lawn, the landscaping, the roof, the termite protection. Perhaps there will even be a pool or a workout room. Assigned parking is a definite plus. All of these are some great features of owning a condo instead of a single family home.
So why is it becoming so difficult to get a condo financed?
The most popular financing method of any home purchase, whether single family, townhouse or condo, is an FHA loan. These loans are so popular because of the low down payments (3.5%) and the less strict lending and credit score requirements.
However, FHA lenders want to be sure that you are buying into a condo association that is healthy and can afford to maintain the property they are taking as collateral for your loan…and that cannot be said for many associations today.
There is an approval process that a condo development must go through in order for the individual units to qualify for FHA financing. This process includes providing the covenants, restrictions and by-laws of the association to the mortgage company or banker. Additionally, lenders want to be sure that condo dues are being paid, that there is a strong enough reserve to take care of any maintenance issues and that a surety bond exists to protect the association from any malfeasance by a board member or director. There are usually limits to the number of rentals allowed in a development as well – typically more than 50% of the condos must be owner occupied.
All of these rules came about in response to the overgrowth and failure of so many condo developments across the country, including many here in the New Orleans area. Even if they were approved at one time, many condo associations have not been reapproved for FHA financing because they cannot meet the current requirements.
Before you start condo hunting
If you are searching for an FHA approved condo development, the best place to start is with your REALTOR. One of the things that a good listing agent will determine when putting a condo on the market is whether or not it is FHA approved. Your REALTOR can provide you with a list of only those condos that meet the guidelines.
If you prefer to search on your own, you can visit https://entp.hud.gov/idapp/html/condlook.cfm to do a little background research on existing condo projects in the area.
Need some assistance?
The West Bank Living Team can walk you through the entire condo buying process. Contact Terri Babineaux at 504.258.5178 for professional buyer representation and advice.