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Posts Tagged: condos

How to finance a condo purchase

Buying a condominium unit can be tricky: Since the units exist within a larger structure, purchase agreements are subject to slightly different rules and regulations. In the past, this led to stricter qualification standards and more limited options when it comes to home financing loans on condos.

"Borrowers have more lenders to choose from and more condominiums eligible for financing."

Yet from the height of the housing crisis, the recovery of the market has meant that borrowers have more lenders to choose from and more condominiums eligible for financing, according to Norman Koenigsberg, president and CEO of First Choice Loan Services. And standards have been eased as well.

"The market is definitely much more liquid," Koenigsberg says. ""Condominiums today are eligible for 95 percent financing with mortgage insurance."

 

Housing is Strong. Why are Condos Struggling?

It sounds like a golden age for condos.

There are 76.4 million baby boomers out there, and a handful of them – 3.9 million and growing – are empty-nesters who have moved from their oversized homes to the popular 55+ condo/townhouse communities.

On top of that, US cities bled residents out to the suburbs from 1950-2000, but the 21st century has suburbs giving cities transfusions of new life. Chicago, New York City, and Philadelphia – 3 of the 5 largest cities in the country – each gained more residents from 2010-2013 than they did the entire previous decade. Smaller cities like Charlotte, Pittsburgh, and Oakland are going through transformations as well. As a shift towards the walkable, high density neighborhood has these and other cities beginning an ascent that could last decades, the condo market should be preparing for liftoff.

It’s not.

That’s not to say housing is struggling. At the end of 2015 the National Association of Realtors (NAR) reported that the six month outlook for single family homes was strong in 48 states. One reason is that the FHA is offering a great deal to customers in single family homes.

In the same report, the NAR described the condo market as “weak” in 41 states. Why? The FHA has made it nearly impossible to buy a condo.

Getting an FHA loan on a condo has always been tricky. With a single family home, only the buyer needs to be approved. In a condo, both the buyer and the condo association need to be approved. Pushing matters towards impossibility, the FHA invoked two, devastating new rules on condo residents and condo associations several years ago which forced the industry into decline: