Orange County homebuyers planning on purchasing a condominium using FHA financing have always needed to make sure the condo project they are looking to buy is in an FHA Approved project. Buyers and Realtors can quickly determine whether a project is approved by visiting the HUD website and typing in a project name or tract number. It is even possible to print out a list of approved projects within a city or zip code. But what happens if a condo project is not on the list? The answer has been to use the FHA Condo Spot Approval Process. The Spot Approval process allowed a lender to close an FHA loan on an individual condo unit within an unapproved complex. However, as of the June 12 release of FHA Mortgagee Letter 2009-19 the Spot Approval is gone.

Why Was the Spot Approval Process Eliminated?

HUD felt that FHA loans were closing on condo's within projects that would not have been approved by FHA. There was a feeling that lenders were "getting one over on FHA". There also has been concern that some complexes have deferred maintenance but are short on reserves and will need to charge a special assessment in the near future.

So What Now?

There is a silver lining. As of this writing there are a lot of condo complexes in Orange County that are not on the FHA Approved list. There hasn't been much incentive for a lender or Realtor to get a project approved when the Spot Approval could be done relatively easy by the lender. Now, in order to close an FHA loan in a non approved project the lender will need to submit a full Condo package to HUD and get the project approved. Once approved, the project will remain on the list for 2 years before needing to be reviewed again. This should help to expand the approved list fairly quickly. In the short run it will mean more work for the lender and maybe a little longer escrow period, say 45 days instead or 30 days (if your Orange County FHA loans aren't closing in 30 days or less then check this out).

What is Needed for Project Approval?

It's really not much different from what was needed for the Spot Approval. A complete CCR package, including the articles of incorporation, bylaws, plat map, budget, reserve study, outstanding or pending litigation analysis, and a special assessment analysis. Also, no more than 30% of the current units can have FHA financing, and at least 50% (it used to be 51%) of the units must be owner occupied.

Don't let these changes scare you away from FHA financing when it comes to a condo. FHA is still the most flexible loan product there is when it comes to down payment (3.5%), where the down payment can come from (gift), and credit (FICO as low as 600). It is just very important to work with a lender or loan officer who has a thorough understanding of FHA.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Crestline Funding for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

* Licensed by California Dept. of Real Estate. Lic. # 01190897

The first thing an Orange County First Time Home Buyershould do is get PreApproved for an FHA loan. (If you are eligible for $0 down VA, then PreApproved for a VA loan.) Too many times new home buyers, even move up home buyers, begin the home buying process by looking for homes and then even making an offer before talking to a lender. This can lead to a major let down when they find out they won't qualify for the home they have fallen in love with or are not comfortable with the total PITI payment (principal, interest, taxes, and insurance) necessary for the home of their dreams.

What is the First Step in the Orange County Mortgage PreApproval Process?

I quick phone call to a reputable lender or loan officer is all it takes. Hopefully you will find someone who is well versed in FHA loan guidelines and can answer any and all questions that you come up with. A good loan officer should be able to quickly "prequalify" you based on a few quick questions. Below are some questions to think about before calling the loan officer.

• What do you do for work and how long have you been on the job?
• What is your hourly pay or salary? Do you get a bonus or overtime?
• Do you have income coming from any other sources, such as a part time job, alimony, or child support?
• Do you have any car payments, credit card debt, installment loans, student loans, alimony or child support payments?
• How is your credit? Do you have an estimate of what your FICO score is?
• How much money do you have available for down payment and closing costs? The down payment can be a gift, come from funds already in the bank, or come from a 401K.
• How much do you pay for rent? How much of a new mortgage payment (PITI) are you comfortable with?
• Are you considering an Orange County condominium or a single family home?

Based on the answers to these questions an FHA Expert Loan Officer can put together loan scenarios that will give you a complete breakdown for buying an Orange County home with an FHA loan. The loan scenarios should show the purchase price, loan amount, payment breakdown, debt to income ratios, closing costs, down payment, and amount needed to close escrow. Going through these numbers line by line with the loan officer will give you a good understanding of all (or at least a good part) that goes into buying a home. However, you are not yet PreApproved. You are only PreQualified.

So Now I'm PreQualified. What is Needed to Get Fully PreApproved?

Now that you have a good idea of the purchase price range you are shooting for, you will want to go all the way and get PreApproved. For PreApproval, everything you verbally told the loan officer for the PreQualification is now verified. Now, the loan officer will complete a loan application, which can be done on the phone or in person. Orange County Loan applications can also be done online. You will also need to fax or email the following information.

• 2007 and 2008 Tax Returns, all schedules.
• 2007 and 2008 W2's.
• Paystubs for the most recent 30 days.
• Bank statements for the most recent 2 months, all pages. Also, any quarterly investment account statements or 401K statements.
• Scanned (or very clear) copies of drivers license and social security card.

The loan officer will run a credit report showing the credit score, or FICO scores. Next, the loan officer will run the loan application through an Automated Underwriting Engine, which will (hopefully) deliver the loan approval you are shooting for. An underwriter (if you are working with a Direct Orange County FHA Lender) will review the documentation you have sent in and issue the loan PreApproval. The loan officer can then prepare a PreApproval Letter or Certificate, letting your Realtor know what price you are PreApproved for. Your Realtor will include the PreApproval letter with any offers you make, which lets the listing agent and sellers know that you have already met with a lender and been PreApproved and are ready to close escrow fast.

Is There A Cost to Get PreApproved?

Not usually. Most lenders will do it for Free. What is most important is finding an Orange County FHA Loan Officer you are comfortable with and who can deliver on what they are promising. So before you go out and start looking at homes, make sure to talk to a lender first.

Authored by Tim Storm, an Orange County, CA Loan Officer - Please contact my office at Crestline Funding for more information about an Orange County, CA home loan. 877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County FHA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

* Licensed by California Dept. of Real Estate. Lic. # 01190897

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