One of the most popular type of financing used here in Greater Phoenix, Glendale, Peoria, even Scottsdale is FHA financing.
FHA financing here in the valley has really picked up steam as of late with the rush to take advantage of Seller-Assisted down payments or charitable down payment assistance programs like Ameridream, Nehemiah and Grant America (GAP).
The Down payment assistance programs have been banned by the recently passed Homeowner Rescue Act and
Down Payment Assistance will no longer be funded as of October 1st, 2008.
In fact, you should note that banks will no longer be accepting loan applications at the end of this month, August; Some bigger banks are no longer accepting them period.
One of the challenges facing approval of an FHA loan and use of Down payment assistance is that the community must be FHA eligible.
What does FHA eligible mean???
First, let me give you a story.
- Agent took buyers to see a home which they loved
- The listing agent confirmed that the community was FHA eligible
- Buyers made an offer which was Accepted.
- During underwriting the bank tell buyer that community is Not FHA eligible.
- Buyer cannot obtain FHA financing
- Client is now 2 weeks into loan process
- down payment assistance deadline is coming up quickly.
- Must find replacement home by end of August or not get FHA loan
- Maybe not buy a home at all if cannot get FHA loan and Down Payment Assistance
What does FHA eligible mean???
There are several guidelines that must be met to be an FHA approved community.
However, the primary one to look for is that more than 50% of the homes sold in the community must be owner occupied.
In most parts of the country this is not something to even consider. However, in most of the towns around Phoenix this is can be a difficult hurdle to overcome.
Especially, in the Condo conversion market where the community was 100% rental and was converted to Condo sales. Often times the developer did not sell 50% to owner occupants. Thus, there is a a much greater proportion of rentals than homeowners.
In new home sales and new build subdivisions a similar challenge arises. Although, Builders have all lots and homes available for purchase. In many cases 50% have not been sold when lot sales begin in the first many months.
I encourage you to ask your real estate agent do the research for you.
Do not assume because the community has been around a long time that it is more than 50% sold to owner occupants.
Most residents and even many sales agents who work in these communities do not know.
If you are going to use an FHA loan, find out first; Before earnest monies are non-refundable and eligibility for loan approval is denied.
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Copyright © 2008 By James Wexler , *Buyer Beware!- Make sure AZ Community is FHA eligible *
Contact James Wexler (480) 221-8080 for all your Phoenix AZ | Scottsdale AZ Real Estate needs
great advice for buyers and agents. Dont take your clients to communities that are not 50% sold out if they are planning on using FHA financing
Barbara - During the real estate boom this type of thing didnt matter as conventional or non-fha financing was so easy to obtain. Now, it can be a real issue.
I represented a developer at a condo conversion community. Sales were severely hampered by the fact that we could not get our FHA approvale.
As a result, we could not do VA loans as well as use down payment assistance (when it was still around)
We had the scramble on the last week of sept for all those seller assisted DPAs. Let me tell ya, some of the repairs were coming out of our pockets just to get it done QUICKER than a bank could approve!
Renee - I have taken a few dollars out of my pocket for things like repairs as well to get money back into my pocket to get these deals closed
I found out last year that one of the 40 condo complexes in my farm was not FHA eligible. That caught me off guard but I was able to call an FHA representative who rectified the problem. There is very little turnover in the complex so it was obvious to me that the FHA hadn't done anything in that complex in over a decade.
Jim Frimmer - you know that is an excellent point. A community can become FHA eligible. There are even exceptions to some of the rules. A bank can make an acception and approve laons in that community under FHA guidelines if they choose. The banks have a whole package of materiesl they request on sales, HOA budget, etc...
Daniel - Good point to mention that you cannot use VA loan and accept VA certificates of the communtiy is not FHA eligible.
James,
While assisting a young couple recently.....and yea they were going FHA, trying to get them to understand why a development they liked was only partially FHA was a real treat.....only 1 of the 3 buildings were......and of course they wanted in one that wasn't.
Dan B - we have a lot of non-FHA approved communities here in AZ due to the recent land development boom by new home builders , so it is something that comes up frequently, hope you sold themn a house