Tulsa OK HUD-Approved condos are hard to find. What does this mean for Tulsa condo owners trying to sell their condo?
This is a HUGE concern for Tulsa condo sellers, particularly if their condo is priced $250,000 or below. Not being able to accept FHA, VA or Section 184 Indian Loans literally removes 95% of prospective Buyers. How long will your Tulsa condo be on the market if you have to wait for a cash buyer or one with conventional financing with 20% down? Cash buyers expect a deal and may not be willing to pay fair market value. Buyers with conventional financing and 20% down are not usually shopping in the lower price ranges – OR do not want to tie up their cash on a large down-payment when it’s so inexpensive to borrow money.
And none of these loan programs (FHA, VA or 184) are available if the condo property is not HUD approved.
HUD Certified condominium complexes offer distinctive advantages over Non-Certified properties by qualifying for:
- Lower down payments
- Section 184 allows for 97.75% financing without monthly mortgage insurance
- VA allows for 100% financing without mortgage insurance
- 6% seller contributions are always available (conforming loans on condos usually allow only 3%), which equals less costs at closing for the buyer
- Debt to Income Ratios and credit underwriting are much more lenient
- You can borrow up to 110% so you can purchase and remodel in one loan
- You can do an energy efficiency loan to replace windows, appliances, water heater, doors, etc.
- Down Payment Grant Programs and Bond money most often amend FHA loans (click here for condo down payment assistance program)
- Owners can be selling to a larger portion of the home buying market
- It increases demand
So what is HUD approval?
HUD oversees the FHA mortgage program, the VA sponsored program (100% financing) and mortgages back by the Bureau of Indian Affairs (checks and balances). Since 2009 HUD has required condominium complexes to be “warranted” to be accepted for HUD mortgage programs. This generally means an audit needs to be done to make sure the common areas are maintained, the complex is fully insured, association dues are 85% current, mostly owner occupied, the association is controlled by unit owners, etc. – mainly: just being well managed.
So Why are HUD Approved Properties hard to find?
Up until 2009, HUD allowed FHA mortgages to be placed on condo units through a process called a “spot check”. That meant they would gather papers from the condo complex in a random, per-transaction method, and approve the quality of the complex on each individual loan. This was inefficient and FHA absorbed many foreclosed loans due to condo association failures.
Then came 2009. HUD does not allow spot checks any more. The complex must get certified.
How To Become a HUD Certified Complex?
HUD is pretty friendly when it comes to approving well-managed properties. They want to promote urban growth and are rebuilding their HUD approved roster.
The Distinction of Certification comes from one of two ways:
Go to HUD Directly – Called a HUD Review Approval Process (HRAP). The process, if done well by you mortgage consultant, should take 6-8 weeks. The application itself is free, but self-managing the process is not wise for amateurs and in reality fees will be paid to attorneys, management companies, appraisers, etc. to prepare the finalized application.
Use a HUD Direct Endorsed Lender – Called a Direct Endorsed Lender Review Approval Process (DELRAP). Now a HUD direct lender is not the same as a lender that offers FHA mortgages. Contact me to avoid middlemen and get one in your area. This recommended route would usually take approximately 2-3 weeks. DELRAP generally costs on par with a HUD direct approach but the process is faster and moderately more stream lined.
We will need some basic Condominium Association Documents:
- The Declaration of Condominium, CC&R’s (Covenants, Conditions & Restrictions)
- By-Laws of the HOA with (if applicable) amendments
- Copy of the Current Annual Budget
- Insurance Certificates held by association which should include General Liability and Hazard on Common Element Buildings
- 90 days balance sheet
I can get you there. Condo associations should usually be protecting the interests of the owners by keeping the condo development HUD-Approved. This will increase the number of buyers who can purchase units in the development, which in turn increases the demand to buy into the development and helps support property values.
If the article doesn’t answer all of your questions, please don’t hesitate to drop a question in the comments, or for direct communication, please call me at 918-949-7248.