Westlake Village Real Estate Blog

I have fielded a lot of questions about using FHA financing to buy a condo or town home. Here are several points to keep in mind.

1. Is the property a condo or town home? This may seem like a simple question, but actually, seeing is not always believing. In Thousand Oaks a number of neighborhoods, while appearing to be single-family homes, are deeded as condos, that is, they are zoned as condos on the county tax assessor’s record.

2. If the property is a condo, then ask, Is the complex approved by FHA? If the complex is already on the FHA-approved list, the escrow process can go fairly quickly and smoothly – a must if you are buying a short-sale or bank-owned property. For an FHA-approved complex, lenders only need to certify that the project remains in compliance with current FHA guidelines. This streamlined process involves a 1-page questionnaire completed by the property manager.

3. If the complex is not FHA-approved, you may still be able to use FHA financing for the purchase, provided you and your lender can get FHA approval during the escrow process. To obtain FHA approval on a complex that had not been reviewed, the lender must obtain significantly more documentation – including a complete set of homeowner governing and financial documents and title records of every unit in the complex. Collecting the required documents is a time-consuming process which necessarily translates into the need for a longer escrow (typically 45-60 days). It is important to plan for that when you make an offer. Most short-sale and bank-owned [properties will not allow the extra time needed.

4. Consider the monthly cost of homeowners’ dues when you are choosing a condo or town home. These can be more than $400 a month – a fair chunk of your monthly payment. HOA monthly dues typically pay for fire/hazard insurance, earthquake insurance, property management fees, and such services as housekeeping, gardening, pool service, plumbing, roof repairs and general building upkeep – all things you would be paying out-of-pocket as a homeowner. However, some complexes have been able to hold costs down for various reasons, while others have seen their monthly dues go up substantially.

5. Give careful consideration to your choice of lender for your FHA financing. Direct-endorsement lenders have contracts with FHA, allowing them to approve and fund the loans directly; generally, these lenders also have the authority to approve condominium projects. If your lender is not a direct-endorsement lender, your loan will be brokered to a third-party for approval and funding. This process will take longer and will be subject to more restrictive guidelines.

For more information, including the latest list of FHA-approved condo complexes, visit the FHA website, or call Brownie Stanisch at 818.681-2401, Prospect Mortgage, your direct-endorsement FHA lender.