It’s liberating, isn’t it?
It’s liberating, isn’t it?
Most home sales go through without a hitch but there is always a chance that one will hit a snag somewhere along the line. Many of these are minor irritants, some are downright disappointments.
Few of the latter compare to falling head-over-heels for a condo only to learn that the community isn’t HUD-approved so you can’t use your FHA-backed loan for the purchase.
In reality, if you’re working with the right real estate agent, this shouldn’t happen; he or she should be checking the condo complex’s approval status before even showing you the home.
When it does happen, however, it typically leaves the buyer dazed and confused. Let’s take a look at what FHA requires of condo buyers that differs from its single-family home requirements.
Lenders have a tough job, especially when it comes to buyers using an FHA-backed loan to purchase a condo. Not only must it determine if the borrower is a decent credit risk, but it must also take into account the risk of loaning money for a home that is governed by a homeowner association. And, regardless of your credit worthiness, if the HOA has problems, the lender and/or FHA will deny the loan.
Some HOA problems that FHA frowns upon include:
This is by no means the entire list of requirements, but represents some of those we most frequently come across. They are quite demanding – so much so that in 2013, about 60 percent of U.S. condo complexes seeking certification were denied, according to John McDermott of National Mortgage News.
Any home purchase requires a certain amount of due diligence. The buyer’s legal duty is to thoroughly inspect the property and the paperwork that goes with it, before going through with the purchase. Typically, the onus for this due diligence is on the buyer, but in the case of an FHA-backed loan for a condo, HUD does a lot of it for you.
Yes, you still need to read and understand every word on every document included in the HOA documents provided to you before you close on the home. While you’re trying to wrap your brain around covenants, conditions and restrictions, however, FHA will be poring over the financial solvency of the HOA. While they may just find something distasteful in these documents, knowing that they’re scrutinizing the HOA’s budget and other financials should bring you peace of mind.
Becoming HUD-certified isn’t a one-off task, either. The association must reapply every two years.
Finally, owning a home in a HUD-certified community makes it easier to sell down the line.
If you’re toying with the idea of buying a condo with that FHA-backed loan, do yourself a favor and check out HUD’s list of certified communities. Then, avoid looking at those that aren’t on the list. You’ll find the online database, here.
In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the amount of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the My Home section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the 4 Cs that help determine the amount you will be qualified to borrow:
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.
In many areas of the country, the housing market is growing and its strength has lead to a competitive market for buyers and an easier market for home owners looking to sell. In the South Florida market, first time home buyers looking at homes in the price range of $200,000 to $275,000 are facing extremely stiff competition from other buyers who happen to all be in the same boat. It's not uncommon for the top homes in this category to sell within 3 days of being listed, at asking price or even above! Below are some top tips for those looking to enter the property and also for those looking to sell in today’s competitive market.
Sellers are in a position of strength in today’s market. Often times, they have multiple offers from which to choose, and are able to pick the top offer, not only in terms of price, but in other very important categories, such as conventional financing vs FHA/VA vs all cash. Buyers are being asked to submit their best and highest within 24 hours, and are told to look at absolutely everything in their offer, including down payment amounts, amounts being held in escrow, inspection time periods, mortgage commitment days, DU approvals, compressed closing timeframes, and minimal if any seller concessions, even after inspections.
Be alert to property listings and ready to arrange a viewing as soon as something interesting comes up. There will be lots of buyers looking for the same property as you, so when a great house is listed on Tuesday it may be off the market by the weekend. Serious buyers are ready to make an offer and close a deal quickly.
There is no golden rule on whether to accept the first offer you receive or to leave your property on the market waiting for a more attractive offer. It depends on the time of year, the town, the state and other factors that your real estate agent will be able to discuss with you, and help you come up with a plan. In some areas it can be a great idea to jump on the first good offer you receive, whereas in other areas, it is best to wait and have more showings before reviewing all the offers you have received at once.
It’s very rare that a buyer closes a deal on the first property they like and make an offer on. The process takes time and with lots of competition you can easily lose out on a property if you don’t act fast or your offer is too low for the seller to accept. If you miss out on a home, it’s important to stay hungry and keep driven to find the right property next time. First time buyers are often inexperienced, every home you see and every offer you make is helping you learn more about the market and become more comfortable with how the whole process works. Missing out on a property is not always a bad experience, as the home you thought was perfect a week ago does not seem half as suitable as the property you find a week down the line.
A seller should hire a strong and knowledgeable Real Estate Professional to assist them in putting their home up for sale. Your Real Estate Professional will study the other properties for sale in the area, even arrange a few viewings, before putting your home on the market. Your Real Estate Professional will know your competition and how to price your property to receive the most attention from buyers. Every property is different, but he or she should know your own property inside and out and how it compares to the competition. Although the house for sale down the street may have a brand new bathroom and kitchen, you can price your property as an attractive alternative with great value for buyers that want to do their own home improvements. Well priced homes attract the attention of buyers and lead to faster sales and increased competition, which boosts prices.
The housing market can be stressful for both buyers and sellers. In a competitive market, things can move along very quickly and both sides of the market need to be attentive if they want to successfully buy or sell a property. Sellers have the upper hand as they can put in weeks of preparation before entering the market, something sellers should definitely make use of to maximize their success. Buyers have to be on their toes and ready to react to listings and be prepared to make an offer and move as soon as they find the right property. A competitive market is fast moving and can be very exciting for both buyers and sellers, so try to enjoy the ride.
You are invited to celebrate Lake Worth Lagoon at the third annual LagoonFest along the West Palm Beach Waterfront on November 12, 2016.
The purpose of LagoonFest is to encourage the public to discover the marvels of Lake Worth Lagoon and the importance of protecting this urban estuary.
WHAT: LagoonFest - Celebrating Lake Worth Lagoon
WHERE: West Palm Beach Waterfront 101 South Flagler Drive, West Palm Beach, FL 33401
WHEN: November 12, 2016 from 9 a.m. to 2 p.m.
For more information, visit www.LagoonFest.com.