Condominiums offer a lot of perks that make them appealing for first time home buyers. Especially for younger people who choose to live near the urban core of a city, they offer a great chance to escape the rental trap of lost equity and rising housing costs and develop an investment. Condos tend to pop up in areas that are near the action, situated closer to public transit options and walkable areas than suburban single family homes. And more often than not, condos are less expensive than free-standing single family homes in the same neighborhood. Demand for condos is up for these reasons and many more. As the Los Angeles Times notes “list prices for condos in major markets are rising faster than prices for single-family detached homes in the same area. Nationwide, condo sales are steadily taking away market share from traditional homes as suburban boomers downsize and other owners want to live closer to urban workplaces and center city attractions.” When it comes to buying a condo though, many of the advantages given to single family home buyers aren’t available.
However financing for a condo can be difficult to secure, in part because of strict guidelines drawn up in the aftermath of the housing crash. When rolling foreclosures took over in the early part of this decade, the FHA, whose insurance allows lenders to underwrite loans with lower down payment terms and lenient credit scores, got clobbered thanks to their investments in spot loans (read: loans for condos). These loans were banned in 2010 and condo buyers who need a FHA loan need to buy where a special certification has been acquired . . . which makes up a paltry “7% of the country’s estimated 150,000-plus condominium developments” according to LA Times. Unfortunately, first time home buyers are increasingly reliant on the FHA to insure loans because of a variety of economic factors from high home prices to stagnant wage increases. Despite the fact that the real market conditions that warranted a crackdown on FHA condo loans simply, little significant movement has been made on a federal level to update current lending standards. Homeowner associations are required to individually apply to be FHA certified and must maintain certain occupancy levels and standards . . . a task that many simply don’t bother to undertake. The video below explains the complexities that condo buyers encounter with the FHA and VA loan standards:
What to do then? With housing costs rising and mortgage rates at a historic low, the incentives for buying a property are there. Finding a Rent to Own condo can help home buyers who can’t quite meet lending requirements move into their new home and get everything they need to secure a loan in line at the same time. A lease purchase agreement allows condo buyers to lock in a final sale price, which is especially valuable in markets where sale price increases are outpacing the rate at which average families can feasibly grow their savings. A rent to own condo is also a great option for people who are looking to purchase a home after in the aftermath of some recent financial difficulty, such as a divorce for example. Establishing a lease option gives people time to build up their investment and their financial profile at the same time, breaking with the cycle of lost revenue due to renting.