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Less Than 1% of Miami’s Condo Buildings Have FHA Approval

Condos and FHA loans appeal to first-time buyers, but an FHA low-downpayment loan still isn’t an option for many first-timers in many Fla. condo complexes.

MIAMI – According to a recent report by Miami Realtors, only 13 of the 9,307 condominium buildings in Miami-Dade and Broward counties were approved for Federal Housing Administration (FHA) loans, down from 29 last year.

In Florida, potential condo buyers must personally qualify for a home loan, but the condo project itself must also undergo approval for mortgage lending. Underwriters worry about the financial stability of the condo project, especially with regards to hurricane coverage, which creates a number of problems.

“If you have a partial loss,” such as for a hurricane, “you agree to (pay) out of pocket to a certain percent,” says Danielle Blake, chief of public policy for Miami Realtors. “If you have a coinsurance clause, you have to prove that there’s enough in the condo building’s reserves to cover it 100%. But in Florida, condo owners are allowed to waive reserves by a majority vote on an annual basis.”

According to Blake, many associations opt for special assessments instead of collecting monthly reserves because Florida’s elderly condo owners don’t want to invest in a reserve account – and this makes it extremely difficult for potential buyers to get an FHA loan or even a conventional loan.

Even in the few condo buildings in Miami with FHA approval, lenders still have to obtain a full condo questionnaire in order to meet FHA requirements.

The return of spot loans, which allow for single-unit FHA mortgage approvals, has not increased homeownership opportunities as dramatically as many had hoped. Renters make up more than 40% of Miami’s households, and the metro ranks as the seventh least-affordable large metro in the world.

The increasingly difficult path towards homeownership in Miami threatens the region’s long-term economic prosperity.

Industry experts say homeowner associations and condo boards should be educated about the potential impact if buyers can’t get FHA loans when unit owners decide to move out.

Source: Miami Agent Magazine (05/14/2020) Kennedy, Kerrie

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