In an ongoing circus of head-scratching, it’s being reported across the state that many condo complexes are losing their Federal Housing Administration certification. This, on top of the already difficult lending environment applied to condos.
Which is important in Blacksburg because we have a lot of condominium complexes, and when a complex is certified it means the FHA will loans to buyers in that complex. However, if a complex isn’t certified then it makes it difficult near impossible to get a mortgage loan in the conventional mortgage market.
Essentially what happened was that condominiums have had some of the highest foreclosure rates nationwide, and when the FHA realized this, they decertified all condo complexes, requiring each to be recertified. You can search Blacksburg condominiums using the HUD Tool, which shows that 15 complexes in the 24060 zip code have been recertified, but thirteen of those fifteen have had their certification expired, and only one has had their certification extended. Yes, I’ve added emphasis to the previous statement.
Why does any of this matter? Without FHA certification, you cannot purchase a Blacksburg condo using a conventional (i.e ANY) mortgage loan that will be sold on the secondary market. It might be possible for a bank to take an in-house loan, called a shelf loan, but consider it highly unlikely. As a buyer of a condo, do you want to take the time to find the right condo, apply for a loan and get six weeks through the process, only to find out days before closing that you can’t actually purchase the unit? As a seller, do you want to accept an offer, take the condo off the market for several weeks and then find out the same thing? Neither is a good situation, and your agent and lender need to know how to determine whether the complex you’re trying to get into is currently certified with the FHA. And, compounding things further, the owner-occupancy rate must meet the lender’s guidelines, which means it’s even more important to consider using a local lender when purchasing a Blacksburg condo – they know the complexes and the market nuances, and armed with that knowledge can go to bat for you on your behalf when it comes to these ratios.
Long and short? There are a lot of Blacksburg condominium complexes not currently certified with the FHA, and they’ll need to do so if they’re going to sell any more units in their complex. As a buyer or seller, ask your agent whether your complex is in compliance. You can see more, including requirements for FHA Approval of a Complex, here.