By Laura Rubinchuk
When I heard about the new FHA DELRAP/HRAP guidelines for condo financing, my gut reaction was, “Well, I might as well go find another job.” Some of the subjective guidelines for the new approval process will greatly affect my market:
-Proximity to a noise (i.e. busy streets, highways)
-Proximity to a gas station
-Percentage of commercial space
And the list goes on, and on… For those of us in a Metropolitan/Urban environment, the whole point of condo living in the city is ease of travel and lifestyle. In the D.C. area, we have numerous major highways that lead into the District, the metro system, etc. and the majority of our high-rise condo buildings are located within blocks of these things.
So tell me how it makes sense to take buildings we’ve been selling for years with spot-approved FHA loans, taunt first-time buyers or other qualified buyers who have the minimum 3.5 percent down-payment, and tell them that because it’s the first of the month of this year, now they have to wait WEEKS to months for a green light on the home they fell in love with, if the seller is willing and/or able to wait at all!
Again, I ask, how does the economy continue to grow if the FHA puts the cabash on condo financing and eliminate the pool of buyers who don’t have the minimum 10 percent down-payment but qualify for the loan? Even funnier, why is the HUD website of approved condo projects only searchable from Monday-Friday, 8 a.m.-9 p.m.? Does the site need beauty sleep?
I don’t intend to start a political debate, but I can’t help wondering if the underlying reasons are a bigger concern? Is the FHA running out of money? Are they trying to keep out some buyers so some remain for later in the year?
Laura Rubinchuk, GRI, is a real estate practitioner with Keller Williams Realty in McLean, Va. Visit her blog at www.ArlingtonRealEstateNews.com or her Web site at www.TheLJRGroup.com.
My impression on the FHA DELRAP/HRAP guidelines were…I guess FHA doesn’t want to finance condos any longer. It’s a shame too because in most cities, single family homes are cost prohibitive and condos are being pushed as the “green” alternative. It doesn’t make any sense but honestly….what do you expect from the government?
Funny how red-tape government doesn’t want to finance red-tape government housing which condos can become when you add in associations and bylaws.
Laura, I agree with Jonathan, that is what I read into it as well : FHA doesn’t want to finance condos any longer, and this is their way of making that happen.
And something else about these FHA guidelines: They inspire over-active condominium association boards to enact restrictive policies on “investor-owners” (who may just be former residents who are holding onto their properties for a while). At my condominium unit that I am renting in Ballston, the association has threatened to place a quota on all leasing in the building, supposedly to protect their property values on the whole. The last time I checked, the FHA locks down on financing in a multi-tenant building after a certain percentage of non-resident owners is reached, toward the policy goal of ensuring that owners are residents.
Condos are depreciating at a rapid pace in my market, frankly I don’t blame ’em for not wanting to finance them anymore. FHA approved? They’re flying off the shelves.
Condos have become the house trailers of the 2010s.
Eventually there will be specialty lenders that only work with condos, buyers will be required to put down a large percentage and pay a higher interest rate.
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Interesting how different markets work. Condos are still flying here in certain locations. We just got approval on a very popular building here and my lender was the lead guy, while 3 other contracts were waiting on final approval. It’s going to slow things down here for the buildings not yet FHA approved.
We just had several uber luxury high-rises go up (i.e. basically living at the Ritz), but with our market, condos aren’t going anywhere, anytime soon.
I hear ya! As a condo specialist in Nashville, TN my business has been suffering since late 2008 due to difficult condo financing. It’s not just FHA – it’s Fannie Mae too! Why can’t they let the market determine the value and desirability of a condo development? So, so, frustrating!