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- iHaveNet.com
Ilyce R. Glink
Mortgage lenders have tightened the screw: It's tougher to get approved for a loan in 2010 than it was in 2009 -- and it's a lot tougher than it was four or five years ago.
These days, mortgage lenders will verify all of the information on your application, including your income, assets, job status, credit history and credit score, and where you got your cash for a down payment.
At the moment,
It's bad enough if you're buying a single family home. For condo buyers, the application and approval process is getting even tougher.
New condo financing rules went into effect the last several months that may make financing for your condo an impossible proposition.
First, when it comes to FHA loans, most condo buildings must be "approved" properties or buyers will not be able to finance their purchase through FHA.
In some cases condo buildings have been FHA approved for some time, but if the condominium project is not approved, the association might want to approach FHA to get the condominium project approved. If the condominium project is approved, buyers for units in that project will have an easier time getting financing.
FHA loans are now a greater percentage of the mortgage market, and condominium associations must recognize that a large percentage of buyers of condos priced under
The condo building approval process can take up to six months, as FHA combs through the property, its budget, financials and other information.
What is FHA looking for? A wide variety of factors can sink a condo building's application for approval, including the number of people who are late on paying their assessments, the amount of cash reserves the property maintains, and the ratio of leased to owner-occupied units. Above all, FHA will reject a condominium building if the property needs lots of repairs and work.
According to some lenders,
The budget and cash reserves issue alone will sink plenty of condo buildings, say real estate observers. If a property has a budget of
There are other obstacles lurking in the wings. Developers who built multi-use properties, with commercial, retail or restaurants on the first floor and condo units above may find that their properties will not be approved for financing.
Condo buildings applying for FHA approved status (which is separate from
In addition,
Condo buildings located in markets where property values are stable will have to undergo a less intensive review of the condominium building's finances and documentation.
All this is bad news for condo buyers. Buyers who didn't close before the end of 2009 may now find themselves rejected for financing if they are buying in a condo building that has not been approved or can't be approved. Can you imagine the headaches this will cause?
Lenders say that buyers who need a loan to close on their purchase should ask whether a building is approved for financing before bothering to go for a showing.
In other cases, buyers might want to get condominium documents ahead of time to determine if the status of the condominium will be a problem for the lender. Getting that information well in advance might eliminate or limit some of the headaches buyers and seller are facing as they try to buy and sell condominiums.
While there are some waivers being granted, condo buyers all over the country will find it more difficult to finance their purchases. These days, if you can't finance a property, the number of prospective buyers will decline, and the property value could tumble.
Condo owners and buyers beware.