FHA Loans for New Orleans Condos-FHA Advantages, The spot approval process!
Being able to obtain an FHA loan on your condo has several great advantages. The main biggies in my book are listed below. There are limits as to the amount you can borrow under the FHA rules and they vary by area. The upper limit for the New Orleans area is $271,050 for home or Condo.
The down payment of 3.5% is much better than the 10% down payment for conventional loans. On a two hundred thousand dollar loan, the FHA down payment is $7000 versus $20,000 for a conventional loan.
You can receive a gift from a relativefor your entire down payment under the FHA guidelines. They will have to provide a gift letter. This cannot be a loan.
The thresholds for credit scoring are lowerthan conventional loans and there are no ads ons for scoring below a very respectable score of 700. There are no hits for people scoring 620. There is of course more than scoring when getting a loan.
The FHA insurance rate is almost half than of a conventional loan. The PMI on a conventional loan can be as high as 1.29%. You have to have PMI if you put down less than 20%.
The seller can pay your closing cost and prepaids on your closing cost. This is typically 2.5% of your loan amount on a condo. You would be paying a little more to put up a little less. This means you can keep some of your cash for other things.
It is extremely important that you try to stay local and go with an experienced loan originator that has in house underwriters so we can follow through with the process. Going with an out of state lender is asking for problems in 90% of the cases. You will not get the care and expertise that you need.
There are however some very good lenders and Jeff Bollinger is one of them who is an FHA expert in my eyes. He has a weekly blog that can answer many of your questions just by reading his thoughts and many comparisons he makes. A true expert indeed.
There is an FHA list of condos that are qualified for FHA loans that need no spot approval. The problem is that the list has not been updated since I have been in real estate. That is 13 years which leaves out many of the nicer things in the market. Many of the better choices are not going to be on the list, bureaucratic ineptness is the most likely answer as to why the lists are not updated.
There are ways to get a spot approval on a condo. The condo association has to meet certain criteria. Here is the check list that is used. Its always better to know what they are looking for when trying to make this type of loan.
The following requirements must be satisfied before a spot loan is endorsed:
|•||The condominium project must be complete. There should be no ongoing or anticipated addition of any units, common elements, and/or facilities.|
|•||Control of the common areas of the project must have been turned over to the unit owners association for at least one year.|
|•||The owners association must provide evidence that the project has the appropriate hazard, liability and flood insurance.|
|•||Individual units in the project must be owned in fee simple or be an eligible leasehold interest. The project’s legal documents must provide for undivided ownership of common areas by unit owners. By virtue of this ownership, unit owners must have the right to use all facilities and unrestricted common elements.|
|•||The project’s documents should not place any legal restrictions on conveyance. Any provisions that seek to limit the free transferability of title is generally unacceptable. Such restrictions include rights of first refusal and restrictive covenants. Certain governmental or nonprofit programs designed to assist in the purchase or rental of low- or moderate-income housing are exempted from the restrictions on conveyance provisions.|
|•||At least 90% of the units in the project must have been sold.|
|•||At least 51% of the units in the project must be owner-occupied.|
|•||No single entity may own more than 10% of the units in a project. “Entity” includes an individual partnership, corporation, limited liability company, limited liability partnership, joint venture, investor group or other natural or legal person qualified to hold an interest in real property. The 10% restriction does not apply when the ownership of less than three units would disqualify an otherwise eligible project.|
|•||HUD recognized that the 10% cap on the number of units that may secure FHA insured mortgages in a given project can place a small regime at a disadvantage, since only a few units will invoke the limit. Accordingly, a two-tiered system was established. For condominium projects having more than 30 units, no more than 10% of the units may have FHA insured loans at any given time. Condominium projects consisting of 30 units or less, can have up to 20% of the units encumbered by FHA insured mortgages under the spot loan rule.|