- Condo bylaws often contain a right of first refusal in Declarations.
- Too many investors can be problematic; the FHA now allows up to 50 percent of the total units in the condo to be owned by a single investor or entity -- as long as the other half are owner-occupied as principal residences.
- It's vital to make sure the building has adequate insurance coverage including fidelity bond and flood insurance.
This short guide will give you a clear road map to avoid issues when using FHA financing for condos. Many of these rules also apply when putting less than 25 percent down on a condo using conventional financing for a primary residence or a 30 percent down payment on a second home.
Every issue that is covered can be overcome and taken care of from the inception of the transaction. If the due diligence is handled upfront, there will be no surprises for you or your clients. It’s important to make sure the building is:
- Approved for FHA financing if your buyer only qualifies for an FHA loan
- Meets all of the conditions in this guide if a condo questionnaire will be required from the lender
In this guide, we’ll cover each potential deal killer so you don’t waste time showing condos to a buyer who could never afford it.
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Adam Stephens is a branch partner at The Stephens Brotsky Group at Primary Residential Mortgage Inc. Connect with him on LinkedIn or Facebook.
