Loan Modification

FHA Helping Sell Luxury Condo Projects

By Gina Pogol

In the past, a luxury condominium development would not have sought out FHA approval for a couple of reasons. First, very few fell into the price range that would make an FHA loan a feasible alternative. Second, being approved for government financing did not project the aura of exclusivity that the sellers wanted; if anything, FHA approval was a detriment, a label that packed a low income stigma not compatible with concierge service, spas, and rooftop garden lounges.

That’s all changed.

According to Bloomberg, properties in some of the most expensive real estate markets in the country are scrambling to get approval to be financed through FHA. Take the project called Tempo, located in Gramercy Park, New York City, which recently sought and got FHA approval. This enables buyers to make a down payment of as little as 3.5 percent, with maximum loans of $729,750 on units that range in asking price from $820,000 to over $3 million.

During the mortgage crisis, FHA loan limits were raised to make the financing a more viable alternative in more expensive parts of the country. After all, $400,000 may buy a mansion in the wilderness of West Virginia or the plains of Kansas; in New York City it gets you a porta-potty.

Coupled with expanding loan limits is the price devastation in real estate markets, moving formerly unattainable condominium projects into the sights of upscale bargain hunters. Suddenly, government-backed financing is a game-changer and a way to get families into those empty new homes.

And sellers and real estate pros are pragmatically forgetting about the stigma of “government housing” and projects are touting their approval to potential buyers. Like 99 John Deco Lofts, a 442-unit apartment conversion project in downtown Manhattan that features a flowered meditation garden and spectacular Brooklyn Bridge views.

The development began selling condos over two years ago, and obtained FHA approval in March 2010. It has had 10 units go into contract with FHA backing since then. Then, FHA suspended its support for the building Aug. 3, according to the agency website. FHA approval can be fluid, because one of the factors considered is the percentage of the building occupied by tenants, and another is the percentage of units financed with FHA mortgages. The property is reportedly working to have its approval reinstated.

Full post as published by FHA Mortgage Guide on August 23, 2010 (boomark / email).