Profile picture for sarahriggs1

Is it possible for a building that is currently nonwarrantable to become warrantable or FHA approved

We are currently trying to decide whether or not to buy a condo in a building that was deemed Frannie Mae unwarrantable because it has 21 percent commercial ownership (a barber shop owns the bottom and then there are three condos that are owner occupied, good reserves, otherwise in good shape)?
We have found viable mortgage options because we happen to have good credit and have cash to put down a hefty down-payment.  We are very worried about resale though because we don't believe we will live there that long as first time home-buyers.  The condo's HOA (the four owners) has voted to try and see if they can change the ownership percentages through the bylaws and make the building warrantable?  IS THIS POSSIBLE? Is it possible for a building to gain FHA approval when it is nonwarrantable by Freddie and Fannie (due to commercial ownership over 20 percent guideline)?  Who would be qualified to answer these questions...I've searched for specialized attorneys etc. and can't find answers.  
  • November 04 2013 - Chicago
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Answers (8)

Profile picture for Newman Mitrick Group
The board in the building should meet and vote to amend the bylaws so it becomes warrantable.  This happens frequently and isn't a big deal.  No one should have a problem with this as it essentially increases the value of everyone's investment.
  • May 12
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Profile picture for John Steeby
For awhile FHA was allowing spot-approval and had identified certain lenders who could do them. However with the recent changes and the advent of the "Qualified Mortgage" product, funding is getting more challenging.

Is this the condo of your dreams? Then the reality is that with the current funding climate you may need to explore extraordinary options and that could be expensive.

There are many different ways to go in these situations. Even with 18 years in the business and as a licensed instructor, I would never advise anything other than talk to a mortgage broker and explore your options.

Knowledge is power!
  • April 05
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  • March 13
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I thought it was 50%, Sara. I'd ask my lender to re-check that.
  • November 04 2013
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FHA is pretty strict on their guidelines. I dont think that the property would be warrant-able any time soon with FHA. This takes some time to do especially if your trying to get the commercial ownership changed. Maybe the HOW can speak to an attorney about this for help.
  • November 04 2013
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Profile picture for Andrew Malak
You want an attorney who deals with a commercial real estate. Village/aldermen should be able to help you but do not count on them too much. Anything is possible but takes time and money. It takes minimum two years for FHA.
  • November 04 2013
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Any R E attorney should be able to tell you what, if anything, you can do to change the bylaws. However that is theoretical and before you actually buy. Is the unit that great to want to take the risk? There are lots of buildings like that and people just need to use lenders who do not follow fannie/Freddie guidelines. There are a decent number of them out there.
  • November 04 2013
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Profile picture for Matt Laricy
If they someone took away ownership percentage from the commercial space, which I am not sure how they could, then it could be possible. They would have to get under 20% then they would have to meet all the other guidelines to apply for FHA approval. I would say if this is a property you want to buy in the next year or so, then no it wont be going FHA anytime soon.
  • November 04 2013
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