Condo buyers get busy

All signs point to condo financing becoming more difficult in the short run. The Federal Housing Administration will be tightening their financing rules for condos starting on Nov 2nd. Among other things, they'll be requiring that a condominium complex have a reserve study performed or renewed within the last year, less than 30% of homeowners with FHA loans, and a new HUD approval for the property. That's right, in order to get an FHA loan for any unit in a condo complex, the complex will have to go through a new, "improved" HUD approval process. Only HUD or an approved lender can perform this approval and the process is quite involved and likely to be expensive. Buildings that were previously on the approved list will have to re-apply.

Why not just wait to buy a condo until the fall out from these new FHA rules is known? Well, the Federal Reserve recently confirmed that they will slowly draw down the number of mortgage-backed securities that they are buying through spring of 2010. Most lenders believe that mortgage interest rates will begin to rise as the Fed pulls back, so that rates will rise above 6% by next year.

If you're thinking of making a condo purchase, it's time to look hard at your options. If you need an FHA loan, you may be shut out of today's low prices and interest rates unless you make your purchase before Nov 2nd.