Sue Fox, @Properties. Direct 773.816.1788

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Tired of FHA? Some Chicago lenders offer condo loans with 5% down payment

filed under: Buyers, FHA loans, First-time buyers, Mortgage Rates posted on March 11th, 2010

FHA-APPROVED, AND THEN SOME: At 2930 Sheridan, a rehabbed tower where sales have been sluggish for two years, buyers can choose between FHA or a 4.25% interest rate with 5% down.special financial deal

FHA-APPROVED, AND THEN SOME: At 2930 Sheridan, a rehabbed tower where sales have been sluggish for two years, buyers can now choose between an FHA loan or a special financing deal (a fixed 4.25% interest rate on a 30-year loan with 5% down.)

It’s a tricky time to be using FHA to buy a condo. Most Chicago condo buildings are NOT already FHA-approved, and the Federal Housing Administration recently changed its rules to eliminate “spot” approvals. This means that the whole condo building must be approved before FHA will insure any mortgages there, a process that now takes about a month.

Many buyers are attracted to FHA loans because they require low down payments (just 3.5%). But after a few weeks out looking at condos, people often tire of the FHA game, because (at the moment) it is severely limiting which buildings they can buy in.

But there is an alternative! If you have good credit and can come up with a slightly higher down payment, several Chicago lenders — including Guaranteed Rate and Wintrust Mortgage — are now doing condo loans with just 5% down. Northern Trust is also offering low down payment loans for people with good credit, although that program has some income restrictions.

Eventually, once many condo associations complete the paperwork to become FHA-approved, there will be a broader selection of Chicago condos for FHA buyers. But at the moment, with thousands of first-time buyers trying to close in time to claim their $8,000 tax credit, trying to find an FHA-approved condo in a hurry can be challenging.

Why limit your choices? If you can scrape together a bit more cash, you may be able to qualify for a 5% down mortgage that will work for a much wider selection of properties.

Written by Sue Fox //

  1. Aimee Renkes

    Great point Sue! As a Wintrust mortgage consultant I’m proud that we offer 5% down and have been doing so for about 1 year now. And I’m also proud that in less than 1 week I was able to work with a HOA to get a condo project FHA approved so my buyer (who is an @ client too) can buy in the condo building he loves without conventional financing…unfortunately he wasn’t able to get approved with a conventional loan so FHA was his only option! We were very nervous about his search and being limited like your post says, but it wasn’t hard at all since the seller and condo association was cooperative! But definitely helpful to have buyers get pre-approved through both loan options to be on the safe side since the tax credit is expiring soon…

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