I hear from buyers frequently that are interested in buying a foreclosed home / bank owned property. Sadly, in the under $750,000 market, the competition is brutal. Many times those with 20% down or more will trump those entry level buyers with FHA or VA financing. Even with a strong, high down payment offer, the process is very challenging, listing agents are inaccessible, and offers go into an email black hole.

If you are frustrated, you are not alone. Buyers and agents alike are very discouraged. This video animation done by SanDiegoCastles, is a tremendous illustration of the consumer frustration that abounds.  If you ever need help in San Diego, Kris Berg is your gal.  Love her!

It was not long ago, lending was easy, too easy. Did you need money?  No.  Did you need assests?  No.  Did you even need to prove you had income?  No.  So why do an FHA loan?  We didn’t.

Times have changed and there are limited options for first time buyers that aren’t coming away with a ton of equity from the sale of their last home.  Fortunately, there is FHA.

The Federal Housing Adminstration, or FHA, provides mortgage insurance on loans utilizing FHA approved lenders.  The buyer must qualify but only needs a limited down payment. The key here is that if the buyer is looking at condos, the complex must also be FHA approved.

I recently took a listing in Rancho Santa Margarita.  It’s a well priced condo by RSM Lake.  A 2 bedroom, 2 bath home with a 1 car garage, it’s one of the few traditional sellers in that price range.  No waiting for the banks – but with no FHA approval currently on the complex, we have cut some of the great first time buyer pool that would be great for this home at $285,000.  In the meantime the Brisa Del Lago is working on getting that approval again.

And therein lies the problem.  Whenever a complex has had a litigation of any kind, they loose their FHA approval and must go through several steps to regain that FHA approval once that litigation is settled and work completed.

Because FHA lending has not been an issue for some time, many complexes not only let their FHA approval lapse, but once the litigation was resolved, many of the homeowners associations never renewed the applications.  No one complained because no one was applying for FHA loans.

The Homeowner Associations owe it to the homeowners to get this issue resolved sooner rather than later to maximize the buying pool for their homeowners.

If you are a buyer or an agent looking for a condo, check to make sure it is approved by FHA.  If they are not approved, hope is not lost.  Find out if your lending can do a ’spot approval’ for that one unit.  More and more lenders are working on this while condo’s are processing the applications for renewed approval with HUD, U.S. Department of Housing and Urban Development.

Orange County condos and homeowner associations are working on this but it will take some time to catch up to the changing buyer pool and lending restrictions.