FHA Restricted Condo

1 Reply

I am looking to get in to rental properties by buying a condo. A lot of the condos in my area are restricted to cash and conventional financing only. I am able to buy it with conventional financing and after running the numbers they will cashflow every month. But should the non FHA financing be a concern for resale in the future?

Thank you

Hi @Nicholas Denning ,

5% down Fannie and 3.5% down FHA are both low barriers to entry.

The primary difference is that FHA has lower credit standards. For creditworthy people, often they do FHA because it's easier for the lender to get an FHA loan through than Fannie, even though 5% down Fannie is objectively a better deal (ie, lazy lenders). So a huge chunk of FHA buyers can be 5% down Fannie buyers, if they need to be for the deal to happen. Or even the Fannie/Freddie 3% down FTHB programs, if down payment is the issue.

Check property records in the development for other people buying using 5% down and/or 3% down. If they are, great, the only buyers eliminated from your pool of potential buyers are folks with bruised credit. Have your LO give your agent some fliers to leave at the open house, letting folks know about the 3% down and 5% down options. They will feel you are being shady if you 'require' them to use your LO, but the buyers can at least go back to their lender and say "hey why did you shove me into FHA 3.5% down when there is this great Fannie 3% down option?"

If everyone is buying putting 20%+ down, by contrast, that means 1) the HOA is a mess and 2) your pool of potential buyers just shrunk a whole lot.

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

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