Sue Fox, @Properties. Direct 773.816.1788
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Ever since February, when the Federal Housing Administration adopted new rules for the approval of condos, confusion has clouded the Chicago condo market. Buyers hoping to use an FHA loan (which requires only 3.5% down) can no longer obtain “spot” approvals for the unit they want to buy, because now the entire building must be FHA approved. And condo sellers — observing that at least a third of buyers are now using FHA mortgages — are eager to get their buildings onto the FHA list.
So how does a seller obtain FHA approval? I attended a seminar on this very topic last week, and the consensus seems to be that the simplest, fastest way is for the condo association to hire a project consultant or lender for a minimal fee. The paperwork that the government requires can be cumbersome, and the condo building has to meet a long list of requirements. For example, no single entity can own more than 10% of the units, no more than 15% of the units can owe overdue assessments, the building must be at last half owner-occupied, and at least 10% of the condo budget must go towards the reserve.
There are companies like Condo Approval Professionals LLC (which sponsored my seminar) that can walk condo boards through a 2-page questionnaire to see if the building is likely to qualify for FHA financing. The cost of getting the building approved runs from $500 to $1000, depending on the number of units. And the process is now taking only a few weeks, which means a seller can get still his/her FHA-approved condo onto the market in time for the spring/summer buying season!
If you are trying to sell your condo, FHA approval will give it a huge boost in the marketplace. Keep in mind, however, that the FHA maximum loan limit is $410,000 in the Chicago area, which means a purchase price of $424, 350 or less.
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