It’s a common question during the first interview with buyers who may be seeking a condominium here in South Florida:
“So do you have a 25% – 30% down payment for your purchase?”
It seems to be lost on home sellers during the current frenzy of activity that is fueled by investors and foreign buyers that are flush with cash these days, but the predominant purchasers of condominiums used to be first-time homebuyers that may not have saved up enough cash to put down $30,000, $50,000 or even $100,000 on a new condominium home.
However, buyers who use FHA financing, however can purchase homes with as little as 3.5% down-payment.
There’s a hitch, though! You have to find a building that is already FHA, VA or Fannie Mae approved, and here in Fort Lauderdale, there are only a handful!
How does a condo get approved?
It’s a great question, and one we wish more Home Owners Associations would ask about.
It’s not that hard, but does have some cost. The fees typically run around $2,000 plus the cost of a consultant if you decide to use someone who is versed in the process to guide you through it.
Typically it’s the HOA and the management company that make the decision to get the condominium FHA approved.
FHA will look at a number of factors, and three are of critical importance:
- the ratio of homeowner’s to investors – no more than 50% of homes can be investment properties.
- the number of delinquent HOA dues – no more than 15% of homeowners can be delinquent.
- the amount of money in reserves – typically FHA looks for an HOA to have an amount equal to a year’s worth of assessments in the reserve.
- mixed uses – your HOA should not have more than 20% of the total space for non-residential uses.
Considering that first time buyers make up the majority of potential condominium purchasers, it makes sense to your association to undertake this effort.
Low down-payment financing is not just for low income resident – in fact it’s far from the reality of what can happen if your property is only attractive to investors! Investors are typically the kinds of buyer that are looking for the best deal available, and a preponderance of investors buying in your HOA can serve to hold values stagnant or even drive values down!
I’m hoping we all see your condo or HOA on the FHA Approved List one day soon!