FHA

Three little letters that developers NEED to be acquainted with. With the credit crunch and tightening of lending standards I see more and more buyers moving to FHA and MAHA programs. This is making things a little trickier for sales of new construction condos and new conversions of condos. The guidelines require specific owner occupancy rates and a minimum time the association has needed to be in existence for standard underwriting. I am told that there can be "spot approvals" but nothing is guaranteed.

The issue is that developers tend to keep their projects as a single piece of land or as a multi-family until the first unit is sold. At that time, the condo docs are recorded and the condo association is created. This leaves a large portion of the buyer pool ineligible for these condos. In a moderate market, this pool is even larger. As those with available funds would rather live in higher priced areas that are now becoming more affordable and negelct to look in moderate areas.

Many agents do not understand FHA or MAHA programs and either refuse to deal with them or plod along without knowing that there will be surprises around the bend and neglect to advise their developer clients that they could open their buying pool up if they could get approved ahead of time.

Of course there are costs associated, but that has the possibility to be made up in the opportunity cost of having a larger buying pool and selling the units faster.

Now that we are back to a normal mortgage market FHA is going to be the standard for low-down-payment loans. We all better brush up on our knowledge...