What You Need to Know About VA and FHA Loans

Here are the risks and requirements for your property to sell to a buyer getting an FHA or VA loan. DUFFY Realty does not and cannot know if your property will meet the requirements. This is a lender decision based on the borrower.

If you live in a Condo don’t assume your community meets all the requirements; the list can be very fluid and ever-changing.  Also, if your HOA has never submitted the required paperwork to VA or FHA, the complex may not be on the approved list for only this reason.

The buyer will have an inspection on the property within their Due Diligence period. This is separate from the VA or FHA inspection that will be completed during the appraisal process, and will not be the same inspector.

FHA

Review this article also: https://www.fha.com/fha_article?id=1507

• The FHA  Amendatory Clause will be required once the appraisal has been completed. It states the buyer cannot lose earnest money if the property does not appraise, regardless of financing or appraisal timeframes.
• FHA loan rules forbid the lender from requesting a new appraisal simply for a different dollar amount.
• FHA appraisals can stay with the property up to 6 months for any future buyers choosing FHA or VA loans
• Included Appliances must be functional.
• FHA can have seller-required repairs. Most repairs are safety or health-related. Repair costs cannot exceed $10,000.00 or the property is ruled uninsurable. Examples, but not limited to:

• Inadequate forms of egress
• Leaking or worn-out roof
• Foundation damage
• Defective paint surfaces in homes built prior to 1978
• Unsafe decks

• The Seller can contribute up to 6% of the sales price to the Buyer’s closing costs.

FHA CONDOMINIUMS

The entire complex must meet FHA guidelines. You can check with your HOA for more details. https://fhareview.com/fhacondoapprovalguidelines/

Website to see if your community is on the approved list: https://entp.hud.gov/idapp/html/condlook.cfm

Considerations:

• Insurance Requirements
• Financial condition > How many owners are behind on HOA dues
• Pending Legal Actions
• Reserve Fund Requirements
• Rentals vs. Owners: No more than 50% of the units can be investor-owned / rentals.

• 10/26/2016 update – There is an exception to this rule, which reduces the required owner occupancy to 35% (so up to 65% can be rentals).  A special set of additional guidelines will apply.  Condo complexes with at least 3 years of very stable finances, low delinquency rates, and an up-to-date Reserve Study may qualify for this exception.

• Commercial Space: No more than 50% of the property can be used as commercial space
• Delinquent Dues:  No more than 15% of units can be delinquent in their HOA assessments for more than 60 days
• Single Investor Ownership: For properties with more than 20 units, no single investor, entity, or related party may own more than 10% of the units within the project.  For properties with 20 units or less, no individual owner, entity, or related party may own more than one unit. (New rule as of 10/15/2019)
• No more than 50% concentration of FHA Loans within the community

VA

• The VA Amendatory Clause will be required once the appraisal has been completed. It states the buyer cannot lose earnest money if the property does not appraise, regardless of financing or appraisal timeframes.
• VA appraisals can stay with the property up to 6 months for any future buyers choosing FHA or VA loans
• Seller is responsible for the following costs:

• Commissions for real estate agents
• Termite/Pest Control Reports and Treatments if needed

• VA can have seller-required repairs. Most repairs are safety or health-related. Examples, but not limited to:

• Inadequate forms of egress
• Leaking or worn-out roof
• Foundation damage
• Defective paint surfaces in homes built prior to 1978
• Unsafe decks
• Carbon Monoxide and Smoke Detectors
• Railings

VA CONDOMINIUMS

Check this site to confirm your complex: https://lgy.va.gov/lgyhub/condo-report

The entire complex must meet VA Guidelines.

• At least 50% of the units must be occupied by their owners. In other words, less than 50% of the units can be rented out to tenants.
• Less than 15% of the unit owners are behind on their Homeowners Association dues.
• For newly constructed condo developments or projects recently converted from apartments, at least 75% of the units must be sold.
• The project must consist of more than one unit.
• No single entity (individual, investor, or company) may own more than 10% of units in the development.

VA Condo Approval        

To get your complex approved: https://fhareview.com/va-approval-veterans-affairs-condo-approval/