Are you toying with the idea of a condominium? Perhaps it seems like an easy way to buy your first home? One of my family members did that as house prices were rising. They were able to sell a year later with an excellent profit and buy a cute home in the mountains. Unfortunately, the market went down a year or so after that. The people who bought that condo probably had to stay put for the normal 7-10 years or maybe longer before they saw any real equity.
Or maybe, like my parents once upon a time, you have an empty nest. You're ready to downsize and would like less home maintenance. That is one nice thing about condos. All of the outside is maintained by the homeowner's association! Very nice. Although, don't forget, you pay for that through your HOA fees. And there is no guarantee that HOA fees won't go up. If a crisis erupts with something expensive like the pool, irrigation, etc., they could conceivably go up quite a bit.
Need an FHA Loan?
A really big question any condo home hunter needs to start with, though, is what type of loan will you need? And if you're thinking FHA, there's an even bigger question. Is the condominium(s) approved for an FHA loan? What? What does that mean?
It turns out that, at this point in time, condominiums must be approved by FHA for anyone to buy a condo with an FHA loan. You can find out if a condo in your area has been approved by going to the HUD site for condo approval. Only a small percent of existing condos in the United States are approved. I've worked with a couple of clients this past year, trying to help them find a condo they liked that was approved AND that had an available unit that would work for them. It was a long and often frustrating search for my real estate clients. Happily one did succeed. But not all do. At the moment I'm writing this, there are none approved in Roseville or Lincoln but a couple ARE approved in Rocklin, per the HUD website.
And yes! Home sellers are impacted by this as well. Having your condominium complex approved for FHA loans means more possible buyers for your condo. That can mean easier selling and maybe even a higher selling price!
Reverse Mortgages and Condos
Home buyers who want to use FHA loans aren't the only ones impacted by this situation. Senior citizens who like their condos and want to stay there often look into reverse mortgages. But the most popular reverse mortgages, the HECM, are FHA. They, too, require the condo to be FHA approved or they won't qualify for this mortgage.
It may get easier in the next year or three. This past summer, 2016, President Obama signed into law H.R. 3700 which is designed to make the process much easier. That could help first time home buyers. The jury is still out on whether it will help reverse mortgage applicants. And not everyone thinks this is a good idea in the first place.
It will be interesting to follow this topic for the next few years to see what the actual results are. In the meantime, if you are interested in buying a condo, you do still have to ensure it is approved. Which means, you may still have a challenge finding a condo home you can buy. Give me a call at 916-768-0127 or email me at [email protected] I'd be glad to help you work towards your real estate goals.
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