One of our buyers recently ratified a contract on a condominium property. The contract called for FHA financing, and the building appeared to have been approved for FHA loans. It took nearly until the day of settlement to obtain loan approval, at which point it was discovered that the building was not approved for FHA financing. Now the settlement date has passed and both buyer and seller are worried about how to work things out.
The reason this got to the place it did is that new FHA guidelines were recently established, one of which was to increase the loan limits to accomodate DC prices, and one of which changed the way the buildings are approved.
Given the higher loan limits for FHA loans, many more of our DC properties have become eligible for FHA. However one of the stumbling blocks for condos is that many buildings are not FHA approved. In the past, one could get this approval using “spot approvals” which would allow financing for the unit under contract. Under new FHA guidelines, that is no longer possible. Thankfully, though there is another way. It’s called DELRAP (I didn’t choose the acronym!). It’s the name of the process through which a direct endorsement lender is required to approve the entire building for FHA financing. I am told that Wells Fargo can do this within 7-9business days of receiving all documentation necessary for review.
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