It is important that condo buyers be aware that new FHA lending regulations will be implemented starting November 2, 2009. It is still possible to get FHA financing on some condos but it will take more time. There are plenty of other ways to finance condos as well, so don’t let this deter you from buying a condominium.
If there are Condominium listings in MLS that state that a condo is “FHA approved” or “has FHA approved financing,” it is HIGHLY recommended that those remarks be removed if the condos were FHA-approved PRIOR to Oct. 1, 2008 (approx. 1 year ago). FHA policies have recently changed:
1) As of Oct. 1, 2009, all lender “spot approvals” are terminated.
2) Effective Nov. 2, 2009, all condos with “permanent” FHA approval status granted PRIOR to Oct. 1, 2008 will be rescinded. This means that the condo complexes MUST be re-approved by FHA.
3) Mortgagee Letter 2009-19 outlines the new approval process for Condo Projects, allowing lenders to determine project eligibility, review project documents, and certify to compliance of Section 203(b) of the National Housing Act and 24 CFR 203 of HUD rules. This new approval process will be effective for all case numbers assigned on or after Nov. 2, 2009.
I wanted to clarify the information that was released by HUD since the information they released last week was very generic. What I found out is that the proceeds of the $8,000 tax credit can only be used toward downpayment IF the 3.5% requirements have already been met. To clarify the $8,000 cannot be used CANNOT BE USED for the first 3.5% that a buyer puts down, but the money can be applied as an additional downpayment or as prepaid items or closing costs.
I just got new information from HUD released today May 29, 2009 that the $8,000 tax credit can be used toward the downpayment of an FHA insured home. HUD stated on their website that families can only access this credit after filing their tax returns with the IRS This is great news for buyers and sellers of Cincinnati Real Estate.
Today’s announcement details FHA’s rules allowing state Housing Finance Agencies and certain non-profits to “monetize” up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate. To read the FHA’s new mortgagee letter, visit HUD’s website.
Current law does not permit approved lenders to monetize the tax credit to meet the required 3.5 percent minimum down payment, but, under the terms of today’s announcement, lenders can now monetize the tax credit for use as additional down payment, or for other closing costs, which can help achieve a lower interest rate. Buyers financing through state Housing Finance Agencies and certain non-profits will be able to use the tax credit for their downpayments via secondary financing provided by the HFA or non-profit. In addition to the borrower’s own cash investment, FHA allows parents, employers and other governmental entities to contribute towards the downpayment. Today’s action permits the first-time homebuyer’s anticipated tax credit under the Recovery Act to be applied toward the family’s home purchase right away. Unlike seller-funded down-payment assistance, which was a vehicle for abuse, this program will allow homebuyers to shop for the best home price and services using their anticipated tax credit.
If you were planning to apply for the seller funded downpayment assistance program through Ameridream, please be advised that this program will soon be coming to an end on October 1, 2008. There is speculation that this program is being eliminated by Congress because the foreclosure rate by those who participated in this program was higher than other groups.
Per the Ameridream website here is some background information on its Down Payment Assistance Program. Charitable down payment assistance funded in part with seller participation has allowed homeownership to grow without using taxpayer dollars. To date, more than one million families and individuals have utilized this down payment assistance, generating nearly $10 billion in home equity for those families. These working families qualify for FHA insured loans in every respect, but are unable to save the needed down payment. Please visit http://www.supporthomeownership.com to let your voice be heard to Congress to save this program.
The city of Cincinnati’s downpayment assistance programs are not affected by this change.
