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Does the association of a condo building have the right not to accept FHA loans?

I had decided to make an offer to buy a condo with FHA loan but my agent told me that he was informed by the agent of the owner of the condo that the association does not accept offers based on FHA loans.

Do they have the right to do that?
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September 14 2011 - Medford
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Answers (26)

Master at changing the subject as well!

Stand by the fact that the association and or seller need to be educated as they are doing neither any favors by excluding FHA financing for potential buyers!

The HOA are made up of the owners....which are also the current and future sellers!
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September 21 2011
Andrew,

I may be wrong sometimes, but I'm always completely honest.

Happy funding, Rudi
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September 21 2011
Rudi,

How many residents are upside down?  Your 3.5% down is a stretch at best!  If you are completely honest you would admit that whomever is excluding FHA financing as a viable option needs to be educated on FHA financing.
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September 21 2011
Andrew,

We both know a HOA is the governing body of the condo complex. They are not the seller. They also have the authority to approve residents. HOA's are finding a higher percentage of their units in arrears of HOA Dues. They may think there's a greater possibility for this to also occur with residents that have only 3.50% down. 

If that held true, it may cause special assessments to all residents in the complex. Decisions like this is not made arbitrarily. They are voted on by the entire complex. And yes, I would honor that over tying to finagle my borrower into this type of circumstance.  

Happy funding, Rudi
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September 21 2011
Professor Brown, Just to clarify I did not state that I charge $5 to link to that site below. I am referring to the Clarus FHA Approval service which I use if one of my clients wants to check out the situation of a Condo complex, I have found it to be very useful and would not charge my client for this.
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September 20 2011
Rudi,

Putting the sellers mis guided and mis informed interests in front of your clients?  You do business your way, I'll do business my way.  I personally would speak with the listing agent and figure out what the objection is.  Odds are the problem is mis information about FHA financing.

The question that needs to be asked is why would the condo association or seller want to exclude FHA financing.  Why would they care...it has 0 impact on the condo association!  Excluding it is foolish and not working in the sellers best interest.  The bigger the buying pool the higher the price!
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September 20 2011
Good point Andrew. The HOA doesn't need to know the intended purpose. It doesn't matter what they want. As long as you can close or attempt to close your borrowers loan. That's what matters, right?

That's not my style. If I knew the HOA didn't want to be FHA approved, I would honor that. I would suggest to my borrower to use conventional financing or find an FHA approved complex they also like. Now, I would also say there is a possible way to accomplish this, but I'm not the person that will do it.

Happy funding, Rudi
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September 20 2011
Ahhh  Rudi...Conventional loans require a Condo Questionaire in many instances...so if they are unwilling to do that they are not just saying NO FHA loans they are saying Cash Buyers only!

Chris...The Process is Simple and FREE!  I have 2-3 Condo's DELRAP approved a month and have yet to charge a client or association $1,500 to get it done!
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September 20 2011
"you can get your Realtor® to check for you before showing the unit to you or before an offer is presented it costs about $5."

Really? You charge clients $5 to click a link to this website? 

Wow, now that's value added service!
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September 20 2011
Keeping it nice and simple it is the decision of for board of the Home owners association to decide if it is in the best interest of the Condo complex as a whole to accept FHA approval. The process is simple and costs about $1500 and if the Hoa decides to move ahead it will open the market to potential buyers that can qualify with less stricter guidelines. If you are thinking of offering on a building and FHA is the only way you can move ahead you can get your Realtor® to check for you before showing the unit to you or before an offer is presented it costs about $5.
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September 20 2011
Andrew,

Where I see the problem is #9 Condo Questionnaire. The only entity that requires this is the lender. I don't think this is required of the HOA to complete this form for a potential buyer.

Happy funding, Rudi
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September 20 2011

Not really!

1. Recorded condo docs are at the registry off deeds (Sarcasim on) That's what recorded means. (sarcasim Off).
2. Opinion letter nope
3. Association control - part of a regular questionaire
4. As a buyer I would request a budget from the association regardless of the type of financing and a seller or association unwilling to provide one is likely hiding a problem.  I would not want to buy into another's problem!
5. Management agreement - Why would a buyer not want to know what the management company has agreed to do regardless of financing?  Do I have to Shovel or does the management company?
6. Flood Map - NOPE
7. & 8. Pending litigation and special assesment meed for conventional approval.
9. Condo questionaire - I use the conventional questionaire
10. Master insurance - Need on any loan

So No I don't need any more cooperation on an FHA condo approval than I need on a conventional condo approval. 

Any agent or association that says No to FHA just because need to be educated on the approval process.

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September 20 2011
Andrew,

I respond to inquires all over the country as you know. I just made a reference to California. I'm curious if the HOA didn't want a FHA approval, exactly how would a LO or Borrower receive the information you listed on your Blog? Wouldn't the HOA have to cooperate?

Happy funding, Rudi
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September 20 2011
Rudi,

You do not need the condo associations approval to get the condo approved.  So the approval is not really up to the association...Not to mention the OP is in Massachusetts rather than California!
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September 20 2011
Andrew you are going under the assumption that the Condo HOA wants to be FHA Approved. That's not always the case, at least not in California.

Happy funding, Rudi
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September 20 2011
I just posted a quick blog on what documents you need to get a condo FHA approved.  No reason you cannot get a condo FHA approved and close in 30-45 days.
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September 20 2011
Sorry Loreen...Any realtor that allows a seller to not allow an offer based on FHA financing should be fired on the spot!  Getting a condo FHA approved is not all that difficult and should not delay a closing.  If the condo does not meet the FHA guidelines odds are it's a non-warrantable condo and will not be saleable to Fannie Mae or Freddie Mac.
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September 20 2011
Yes, unfortunately, the answer to your question is "yes".  It just so happens my home and real estate office are also in Medford, like you. This is an issue all realtors have to deal with and should know how to navigate around.  There is now a "master list" of condo complexes which have been approved for FHA financing.  The time and paperwork are time-intensive so many associations will not bother to apply.  I would check the list on the HUD website before you go condo shopping again. I'm sure your time is valuable so you really don't want to waste it looking at properties that don't meet your criteria. There are other ways to finance but that's a longer conversation. If you need help, just contact me via phone [edited by moderator for contact information]. I'd be happy to help. Best of luck to you and thanks!
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September 19 2011
There are Condo Home Owner Associations that choose not to be FHA Approved. If that's the case here, there isn't anything that you can do about it if you only qualify for a FHA Loan.

Happy funding, Rudi
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September 15 2011
I suspect it is more about the project not being approved for FHA than the fact they won't accept your loan.  Follow this link:  https://entp.hud.gov/idapp/html/condlook.cfm 
Anyone can find out whether or not a FHA condo project is approved before they even look at the property.  @Sharon, please save this link so you can research for showings.  I have had agents call me at the last minute about half a dozen condo projects....very frustrating for both of us if they are trying to show the property and I am not in an immediate position to fulfill the request.
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September 15 2011
They could, however, its worth talking to the board before you go into the hassle of obtaining the loan and then get rejected by the board. I've seen it when the board usually dont accept it because either the complex is not FHA approved and/or the board worry about the buyer's financial status. 

here are 2 things you might want to explore:
1- if you already obtained the loan, meet with the board, and hear from them on why they will refuse if the bank said YES.

2- if you did not obtain the loan, you should know that even if the building is not FHA approved, you can still obtain another low-down loan (first time home buyer for example) where some states (like NY) will allow you to buy with low down payment and might even grant you the down payment! This option does not require the building to be FHA approved, and depending on the terms of the loan, it could be a better option for you, and probably cheaper to carry it month after month.
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September 15 2011
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I'm assuming the building is not already FHA approved. If you are putting down 5%, then you can look to get a traditional Fannie/Freddie mortgage and the Condo Qualifying may be a little easier. Regardless, a mortgage on a condo has that added issue of making sure the condo will meet the lender's guidelines.
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September 15 2011
I actually used to sell condos for a developer and went through the process of having the complex FHA Approved. The cost was minimal compared to the benefits of receiving FHA Approval not only for a buyer but also current owners who want to sell in the future. You can see if your mortgage broker would consider a spot approval (one time exception) but I know that the guidelines have tightened on spot approvals and it may not be possible.  
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September 15 2011
There are a lot of us on behalf of our clients find it really annoying to discover condos that do not accept FHA after the fact.We could research every condo before we show it, however,some HOA's don't return calls, so it becomes time consuming. It would be helpful if the seller would add that to the remarks so buyers don't waste their time looking and considering.
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September 15 2011
Mariangella,

There are a number of requirements that a condo complex has to meet in order to be FHA "approved" and therefore accept FHA loans.  Some of them can be very costly (such as the number of units the complex has) and it also depends on how many are rented verses owned.

The process is time consuming and expensive. 

MassHousing also has mortgages for condos and their requirements are different than FHA.  You might want to check with your mortgage broker to see if the condo you are interested in meets the MassHousing guidelines.

Amy
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September 15 2011
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yes, there are a number of requirements for a condo building to be able to accept FHA loans and some decide it is not worth the effort/ & /expenses.
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September 14 2011
 
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