A borrower called me today and said that they were approved for $120,000 mortgage to purchase a home in Mesa, Arizona. They wanted to do an FHA mortgage on a condo so they could put 3.5% down payment. The borrower wanted to know if they could do a conventional loan to save on some money. The borrower said they have 3-5% down payment available and a 675 FICO score.
The FHA approved condo’s list is very small now that most approvals have expired in Arizona and around the country. I told the borrower that I doubt very highly that the condo they were looking at was still on the approved list. Sure enough, that condo’s approval expired on July 31st 2011. I told her to definitely think about doing a 5% down conventional.
In order to do the loan as a conventional mortgage, we need to make sure the condo is warrantable, i.e., the condo complex has to be >51% owner occupancy, no one investor can own more than 10% of the units, HOA can’t have any litigation pending, and HOA has to be under the control of the condo owners. After working on the conventional loan approval for this borrower, I realized that I could not get their file approved for anything above $50,000. I thought it would get approved for something close to $100,000 since FHA approved it around $135,000. Be it as it may, the borrower simply could not get a conventional loan approval that would work for her needs. So…we are back to FHA.
My suggestion to borrowers who are looking at condo developments in Arizona to purchase at this time who need FHA financing is to simply STOP their condo search and focus the searches on ‘Patio Homes’ and ‘Townhouses’. The reason being, ‘Patio Homes’ and ‘Townhomes’ do not have the FHA financing hurdles like condos do. They will be treated essentially like single family residences.
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Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.BACK TO LIST