FINANCING NEEDS

Chicago Illinois FHA Loans and Mortgage Programs

Great 30 year fixed rate for first home buyers with 3% down payment Down Payment - and the down payment can be 100% gift from a family member or Down Payment Assistance Program such as Ameridream.  Fair to marginal credit history is needed with minimum 580 score.  FHA will look mostly at the  previous 1-2 years of credit history.  If there are some credit issues, we may be able to overcome them with sufficient explanations and supporting documentation (compensating factors) as to why the derogatory credit occurred.  The explanations must make sense such as loss of job, serious illness, etc.

Bankruptcy must be discharged 2 years and an excellent re-established credit history is needed since the BK.  Revolving and installment loans and/or non-traditional credit accounts such as rent, utilities, car insurance, cell phone, etc. can be utilized for qualifying purposes.  No Credit History is occasionally permitted but only if a documented 12 month non-traditional credit history of verifiable accounts such as rent, utilities, car insurance, can be illustrated.  Collections and judgements must be paid off prior to closing except for medical collections.

FHA guidelines do not require delinquent accounts to be paid.  However, investors and lenders will and their guidelines supercede those of FHA.  Especially within the last 9 months of credit tightening, this policy would not have loosened regardless of the amount of time since the delinquency occurred.  The guides state if the aggregate total is $5000 or more for collections, they must all be paid.  Less than $5000 total is at the underwriter's discretion as to what and how much gets paid...and how that discretion usually goes is for the accounts to be paid regardless.  Any open/currently active accounts that are past due must be brought current.  No investors differ in FHA allowable rules.   Call FHA direct and ask them some questions.  (800) 225-5342

FHA Condominiums - Condo  "Spot" approvals or Full Approvals

Condos requiring spot approval require a ton of work and there is no guarantee that they will be approved.  The biggest hurdle is language contained within the association's declarations that has to be reviewed.  Since the infusion of the new bill and the FED deciding to back mortgages to help offset the housing crisis, FHA is probably going to be more lenient on condos in the near future.  However, this is not currently the case.  Providing an address to us will allow us to determine if the project is on the FHA approved list.

 

The following requirements must be satisfied before a spot loan is endorsed:

The condominium project must be complete.  There should be no ongoing or anticipated addition of any units, common elements, and/or facilities. 

Control of the common areas of the project must have been turned over to the unit owners association for at least one year.

The owners association must provide evidence that the project has the appropriate hazard, liability and flood insurance.

Individual units in the project must be owned in fee simple or be an eligible leasehold interest.

The project's legal documents must provide for undivided ownership of common areas by unit owners.  By virtue of this ownership, unit owners must have the right to use all facilities and unrestricted common elements.

The project's documents should not place any legal restrictions on conveyance.  Any provisions that seek to limit the free transferability of title is generally unacceptable.  Such restrictions include rights of first refusal and restrictive covenants.  Certain governmental or nonprofit programs designed to assist in the purchase or rental of low-or moderate-income housing are exempted from the restrictions on conveyance provisions.  The Department's policy on the free assumability and transferability of property is set forth in 24 CFR 234.66.

At least 90% of the units in the project must have been sold.  At least 51% of the units in the project must be owner-occupied.  No single entity may own more than 10% of the units in a project.  "Entity" includes an individual partnership, corporation, limited liability company, limited liability partnership, joint venture, investor group or other natural or legal person qualified to hold an interest in real property.  The 10% restriction does not apply when the ownership of less than three units would disqualify an otherwise eligible project.

The Department recognized that the 10% cap on the number of units that may secure FHA insured mortgages in a given project can place a small regime at a disadvantage, since only a few units will invoke the limit. Accordingly, a two-tiered system was established.  For condominium projects having more than 30 units, no more than 10% of the units may have FHA insured loans at any given time.  Condominium projects consisting of 30 units or less, can have up to 20% of the units encumbered by FHA insured mortgages under the spot loan rule.

Mortgage lenders underwriting spot loans must perform sufficient investigation and analysis to certify that the condominium project satisfies the eligibility criteria.  Under the regulations, mortgage lenders may employ a wide range of approaches to ascertain compliance with the spot loan requirements.  Project developers, appraisers, owners, associations, management companies and real estate brokers are among the sources of information lenders may use.  To the extent that the Department has information that can be of assistance, it will provide mortgagees with that information.  However, it remains the lender's responsibility to ensure the accuracy of the information it relies upon in making its certification.

The standard Direct Endorsement Underwriter Certifications applicable to condominiums under standard loan programs and the HECM program are not sufficient for spot loan applications.  Some modification is needed.  Accordingly, the following certification is added to the list of Direct Endorsement (DE) certifications in Appendix 3 of Handbook 4000.4, Rev. 1, Ch. 1 and to the list of Underwriter Certification (HECM) in Appendix 3A of Mortgagee Letter 95-54 :

 

The property is in a project that has not received prior approval by HUD but the requirements of 26 CFR 234.26(i) are met.

This certification requirement will be in effect for all mortgages executed on or after 30 days from the date of this Mortgagee Letter.  A similar statement may be used until the requirement for a certification becomes effective.

Local HUD Offices and Regional Processing Centers will conduct random reviews of mortgage loans insured under the spot loan program.  Mortgage Lenders demonstrating a pattern of abuse will be subject to those enforcement mechanisms and sanctions governing FHA mortgage insurance activity.

The spot loan program is designed to relieve a burden on homebuyers in successfully-operating, non-approved condominium projects where FHA involvement is limited; it must not be used to circumvent the general requirement that a condominium project be approved before a mortgage on any unit in that project can be endorsed for insurance.  As previously noted, the approval requirements for condominium projects are found in 24 CFR 234.26, (a)-(h).  Additional requirements are set forth in Chapter 11, HUD Handbook 4150.1 Rev 1, entitled "Valuation Analysis for Home Mortgage Insurance" and reiterated in HUD Handbook 4265.1, entitled "Home Mortgage Insurance - Condominium Units - Section 234(c)".

 

Below is a suggested checklist you may wish to use in determining if the project is FHA allowable.  It reflects some key considerations in assessing the eligibility of a project for spot loans.

 

        SUGGESTED CHECK LIST FOR SPOT LOAN APPROVALS

 

_______ 1.  The legal documents of the homeowners association

do not contain a right of first refusal or restrictive covenant.

 

_______ 2.  The unit is part of a condominium regime that

provides for common and undivided ownership of common areas by

unit owners.

 

_______ 3.  The project, including the common elements, and those

of any Master Association, are complete, and the project is not

subject to additional phasing or annexation.

 

______  4.  (a)  There are no special assessments pending.

 

______      (b)  No legal action is pending against the

condominium association, or its officers or directors.

 

______  5.  The common areas have been under the control of the

homeowners association for at least one year.

 

______  6.  At least 90 percent of the total units in the project

have been sold.  Verified by _________________________.

 

______  7.  At least 51 percent of the total units in the project

are owner-occupied.  Verified by ______________________.

 

______  8.  There are no adverse environmental factors affecting

the project as a whole or individual units .

 

______  9.  No single entity owns more than 10 percent of the

total units in the project.  Verified by ______________________.

 

______ 10.  The units in the project are owned in fee simple or

the units are held under a leasehold acceptable to FHA.

Leasehold in file.

 

______ 11.  The owners association has adequate common area

insurance coverage.  General liability, replacement coverage,

etc. reflects the character, amenities and risks of the

particular development.  Flood and other insurances carried, when

applicable.

 

______ 12.  General maintenance level of common elements is

acceptable and there is no deferred maintenance, based on the

comments by the Appraiser and/or the pictures.

 

______ 13.  The owners association has a reserve plan and a

reserve fund, separate from the operating account, that is

adequate to prevent deferred maintenance.  The amount of the fund

is $_________ as of __________.

 
 

_______14.  (a)  For projects consisting of over 30 units, no

more than 10 percent of the total units are encumbered by FHA

insured mortgages.  Verified by ___________________.

 

_______     (b)  For projects consisting of 30 units or less, no

more than 20 percent of the total units are encumbered by FHA

insured mortgages.  Verified by _______________.

 

____________________________________     ________________________

       (Mortgagee)                           (Reviewer)

____________________________________     ________________________

       (Address)ss)                             (Title)

____________________________________     ________________________

                                             (Date)

__________________________________        _______________________

  (Condominium Project Name)                 (FHA case number)

__________________________________

  (Address)

__________________________________


 

 

CALL
JON MILLER
DIRECTLY AT:
312.738.6013 jmiller@chicagobancorp.com