Life As We Know It

Downtown St Louis saw an investment of 4.4 billion dollars in reinvestment between 1999 and 2008.  During most of that time, the acronym "FHA" used in conjunction with home loans was mostly unheard of (see My Day at the FHA part 1 and Part 2).  Having been developed during that time, there was no percieved need for loft buildings to be "FHA Approved" at that time.

FHA insured home loans have always treated condominiums different than single family homes, having an complicated approval process.  Once approved, FHA loans could be done on a building with "limited review," meaning that the underwriting was simplified and minimal information from the association was required to complete the loan. IN THE PAST, if a condo buildning wasn't approved, but was acceptable, it could go through the SPOT APPROVAL process, by which most loans downtown were done.

In life, the only guarantee is change.

In a past life, watching the ripple effects of government decisions trickle down often meant watching how the affected businesses would respond to the governments mandates.  When the FHA changed thier guildelines, it seemed as if they were trying to make things easier overall.  After all, why should EVERYONE wanting to buy a condo in an acceptable building have to go through a "spot approval" process over and over instead of just doing a bit more work and approving the whole building?  Their goal was to simplify the approval process, stating that any Direct Endorsement lender could do the approval.  What we're hearing is that these same Direct Endorsement lenders are passing the buck to condominium associations. 

In 2008, when I visited the FHA offices, I asked why a condo association or realtor couldn't just arrange for the approval.   My question seemed to be confusing.  "Why can't the lender just do it?" was the confused response.  Of course, knowing lenders, I couldn't think of too many lenders that wanted to go through the public service of having a whole buildng approved just to do one loan. 

The attached picture file shows the requirments needed and most of the buildings downtown should do EVERYTHING THEY CAN to try to comply with these requirements to get thier building FHA APPROVED!  

Looking at the requirements I have some questions.  More will be revealed when I get the answers. 

The basic fact that seemingly alludes condo associations is that the more difficult a condominium is to purchase, the longer it can take to sell and the stronger the buyer's chances of getting a better deal. 

While some buildings will have more buyers looking for FHA loans than others, it would benefit ALL buildings and downtown as a whole if condominium associations act now to get FHA approval for the next two years.

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).