My girlfriend has been house-shopping lately, and found a place she likes. However, with her credit rating (financial situation is fine, but her credit is not great due to a family situation I’d rather not get into here), she needs to put 15% down if the place is not FHA-approved. She can’t afford that much, so she needs a place with FHA approval, since the bank requires a substantially lower down payment in that situation.
The owner of the place did not want to bother with FHA approval, but she made a generous enough offer that he looked into it. It turns out it can’t get that approval because the HOA’s reserves are too low.
Gf is totally depressed over this as she was in love with the house. Are there any potential solutions to this situation or is she completely SOL?
That’s a new one - FHA is weird some times. But if she’s “falling in love” and “made a generous enough offer” she needs to step away from the home buying process, work on her credit, and boost her savings some more.
I may have overstated the case a bit, but she has looked at many places and this is the only one she really couldn’t find anything wrong with. The “generous offer” was $1k above the ask, which isn’t crazy; it was meant to be incentive to get FHA approval. There is some pressure to handle this short term because of a combined $18k in federal and state tax credits if the offer is accepted before the end of the month.
The credit situation is basically an external situation which is is not going away for the foreseeable future. Her income is enough to support the mortgage at the price she offered.
Buying a condo with low reserves is not recommended. Falling in love with a house is not recommended. In spite of the time crunch here, it sounds like your girlfriend would benefit from doing this properly, even if it misses the tax credits. Buy in haste, repent in leisure.
The tax credits only kick in if a contract is signed by the end of the month, not if the offer is accepted. My FHA took 3.5 weeks to go through last summer.
The FHA is doing the right thing. Although, we could ask yet another federal agency to go ahead and set aside intelligent business decisions and let her buy into a place in which the HOA looks less than healthy …
See, if the HOA is less than healthy, then the risk of the area/property losing value or not gaining value are high. That ain’t what I’d want if I were lending you my money, and the protection against my losses as a lender where your property value!
Yep, there is no way that a property is going to be FHA approved in under a week. We went through this 10 years ago, and it took months (granted, there were some blunders made that extended the time.)
Did she shop around for a mortgage from different lenders? FHA minimum down payment is 3.5%. Conventional FNMA or FDMC minimums are 5%. Where is the 15% coming from? That sounds like a particular bank’s rule. The only other condition where I’ve seen 15% or 20% down required was for a co-op, and that’s the co-op’s rule, not the bank’s.
As far as FHA, she needs to make sure she’s with an experienced FHA lender. Rules have changed, and she needs a lender who can keep up with the requirements.
I’m coming from my own recent experience of shopping for a condo with an FHA loan. I can only really afford what I want in the foreclosure market, and my realtor and I went backwards, really, while looking. We looked for something I liked first, then went with finding out if the property was FHA-approvable. That resulted in 3 failed contracts because one property’s HOA was nearly nonexistent, another had a special assessment going on, and the third didn’t want to be FHA approved. This was with my lender doing the approval legwork and me paying $1,000 to get it done - the HOA still didn’t want an FHA loan in their building. But 15% never came up in any context.
Anyway, once we started looking in the other direction - finding all the FHA approved projects in the area - there were only 5 in my price range and I didn’t want to settle for any of them. So now I’m just moving to a cheaper apartment for the next 2 years so I can save a few more thousand and afford a bigger down payment and a conventional loan. It’s a bummer, but the best thing to do. Interest rates will be higher, but not crazy, and the foreclosure market will still be hot.
My impression is that the 15% is coming from her bank (a major bank) as a result of her credit score. I am not sure about this though, I may have misunderstood. Thanks **SeaDragonTattoo ** and everyone else for the info.