Sunday, February 08, 2009
FHA Approval and Buying a Loft
We had our open house at the Ballpark Lofts yesterday and for a while it seemed as if the housing market was back in full swing! Getting so much interest there was almost enough excitement to make up for having to postpone our trip to Cancun scheduled for today.
Someone asked me a question that I take for granted as a realtor and someone who specializes in St. Louis lofts: "So how does this being 'FHA approved' benefit me?"
Back in May 2008, when all of the sudden FHA loans were a big deal in lending again, we did 2 posts to Lofts in the Lou (My Day at the FHA part 1, My Day at the FHA part 2 )that addressed some aspects of FHA financing and some of the flaws in the approval process.
The basics of getting any loan that seems to be more relevant today is that the money lender has to approve of 3 things before loaning money: the borrower, the buy, and the reason. To get any home mortgage, the bank begins the process by approving the borrower (checking credit, income, assets & liabilities). Once the buyer selects a home, regardless of it being a house or condo, the lender must approve the property too. This usually comes with an appraisal.
Condominiums can be complicated. Appraisers don't have the time or access to obtain enough information about the condominium association, its funding, etc. so the bank usually takes care of that. It can be difficult at times. There are several different types of bank reviews that occur when dealing with a condo, but the two basic options are "limited review" and "full review". Buying a condo or loft in a previously FHA APPROVED building helps the process because then your lender would be able to obtain a speedy approval through a limited review.
Most home sales take roughly 30 days to complete. Often times home buyer's think that the process of getting a loan mostly involves shopping for the best rate and everything else falls into place. NOT TRUE! The process of getting financing is only begining during the initial consultations. Usually a good lender can make the process seem like everything falls into place. Getting lenders not fully competent in financing condos can make the process seem like an arduous nightmare.
So my answer to the buyer's question: "How does FHA approval benefit me?" would be that having one fairly big piece of the puzzle already in place will give a borrower more options in financing, a smoother transaction, significantly less down-payment required, and an assumable loan (another story, but a great benefit when selling).