July 18, 2018
If you are in the market for a condo that you want to buy with an FHA home loan, there are some important questions to ask before you commit.
Some of these questions apply to any property type, but some more specifically apply for condo loans or FHA home loans for properties that come with a requirement to join a Homeowners Association (HOA) or agree to its’ rules.
What should an FHA borrower ask a seller about a condo unit or a home governed by a condo association agreement or homeowner association agreement?
First, ask if any applicable agreements include a Right of First Refusal, which requires the borrower to submit any sale or transfer of the home to the association for approval. FHA loans cannot be approved for properties governed by such restrictive clauses or covenants.
You should also ask whether an HOA or condo owner association agreement restricts your ability to decorate, paint, or otherwise modify the exteriors of your property.
You may find some HOA rules don’t allow certain colors, holiday themed decor, or other alterations.
Smokers should inquire about any rules that cover smoking outdoors on the borrower’s property. This can be a major sticking point for some FHA borrowers; it’s best to know in advance what is required for any applicable HOA covenants or rules.
Borrowers who purchase multi-unit properties should ask whether there are HOA restrictions or similar rules that forbid the home owner from renting out the unused units the borrower isn’t residing in.
FHA mortgage loans require occupancy, but owner-occupiers are permitted to rent out the unused living units. Don’t get trapped into an HOA contract or agreement that restricts this ability.
You could also face rules that dictate how your HOA dues or fees are to be paid up to and including the refusal of the HOA to accept partial or late payments, imposition of steep fines for missed or late payments, even foreclosure proceedings that hinge on the borrower’s lack of remittance of HOA or condo owner association dues.
Do not be taken by surprise by such rules-know before you sign, since the FHA cannot provide any recourse for a borrower’s actions in this area.
If the overall agreement does not violate the law or FHA standards, your acceptance of the terms and conditions of such legally binding agreements will be just that-legally enforceable.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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