Condo Developers Seek Out FHA Approval

Getting building-wide approval from the Federal Housing Administration is an increasingly popular way for builders to sell condos.The nationwide glut of new condos has made selling condo units a challenge, especially since Fannie Mae and Freddie Mac have tightened guidelines on condo mortgages. But if the entire building has the FHA sign-off, then buyers can get a mortgage in as little as two weeks with a down payment as low as 3.5 percent.To get FHA approval, developers must include a 10-year structural warranty and a reserve fund. Condo boards must waive the right to refuse potential buyers. In buildings with more than 30 units, no more than 10 percent can be financed with FHA loans. In buildings with 30 or fewer units, no more than 20 percent can be FHA financed.As hard as it is to sell condos now, the situation could still get worse, says real estate research firm Reis Inc. More than 93,000 new units are scheduled for completion this year, a 28 percent increase over last year.Source: The Wall Street Journal, Nick Timiraos (06/17/2009)