Back in July of this year, new legislation carved the path for changes to be made in the world of buying a condo or townhome. FHA Financing has been difficult or impossible to obtain when buying in many condominium complexes around the country, especially since the recession years.
You see, there have long been requirements attached to whether a complex qualifies to be insured by HUD, so FHA Financing would apply, such as owner-occupant to investor ratio, how solvent an HOA is, etc. When the market downturn occurred, these properties dropped significantly in value so investors snatched them up, thus making the ratios out of line for FHA Financing. HOAs were also not very financially stable as foreclosures happened making HOA payments go unpaid as well. We saw a lot of this scenario around the Phoenix Real Estate Market.
Benefits of FHA Financing:
- Low Down Payment
- Low and Fixed Interest Rate
- Easier to Qualify
When you cannot get FHA Financing, then Cash or Conventional applies and that often times will limit whom the buying pool can be for these properties. When investors are the main source, that means prices stay low and the ratios become even worse.
Those former guidelines are now loosening a bit. This is fantastic news because FHA loans come with a minimum down payment of 3.5%, meaning much better affordability for lots of people wanting to buy. Since the price point is generally lower on a Condo or Townhome, then we should see first-time home buyers have a new selection pool open up.
Another challenge was relating to the process an HOA had to endure to get on the “approved” list by HUD. That is also being made simpler, which should help force HOAs to get on board.
All said, these are good changes for our market. If you’re in the market to Buy or Sell, please give us a call @ 623-203-2264 and we’ll be glad to answer any of your questions!