If you are looking to buy a condo, a recent change to FHA loan requirements may just have made your condo purchase more difficult.
In order to get a FHA/VA loan on a condo, the condo development must be FHA approved. If the development has not been approved, it needs to go through a certification process, which checks various criteria such as: must be 50 percent owner occupied, less than 25 percent commercial use, no more than 10% owned by one investor etc. This certification process takes anywhere in the region of 3 weeks to 3 months once the paperwork has been received.
What’s the problem you may ask, surely most the condo developments must have already been approved. Well yes they were, but a recent change means that any development that has not been approved in the last two years will have to reapply for certification. This means that most developments, with maybe the exception of some of the newer ones, will not be able use FHA loans until they have been recertified, which may take some time depending upon the efficiency of the HOA (HOA needs to provide numbers on owner occupancy etc.) and how long it takes the FHA to approve the certification.
This is not just a Salt Lake City Condo Market problem, all condo developments in the U.S. have had their approval status expire.
The only way around this issue is for the buyer to obtain a conventional loan instead of a FHA/VA loan, thus circumventing the approval process. The problem with this is that conventional loans require stricter credit qualifying criteria, and the down payment requirements are greater.
Read this Buying a Condo Just Became More Difficult article on our real estate blog.