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HOW THE FHA CAN FINANCE CONDOS THROUGH SPOT APPROVALS

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On October 15, 2019, the Department of Housing and Urban Development (HUD) brought back spot approvals after their initial ban back in 2010. According to former HUD Secretary Ben Carson during a call with reporters, this change was made to “offer significantly more options for individuals and families to buy a home.”

Federal Housing Administration (FHA) Commissioner Brian Montgomery stated that this decision to bring back spot approvals resulted from three years of planning. Before implementing these updates, getting a condo with an FHA home loan was near impossible. It was especially tricky if the condo did not have FHA financing approval, which was only about 6% of condos in the whole country at the time.

 

What are Spot Approvals?

Previously a whole complex had to be approved for an FHA loan to finance a single condo. Spot approvals are the process of having a single unit approved within a complex. However, the new guidelines approved by HUD and FHA have requisites before the unit approval for FHA financing.

According to the new guidelines, single-unit approval requires that the condominium is in a complex that is not FHA approved. Complexes with ten or more units can only allow 10% of condo units to be FHA insured. However, complexes with fewer than ten units can have no more than two FHA-insured units. Additional requirements and changes include:

  • Approved condominiums must have at least 50% of units occupied by owners.
  • FHA can only insure up to 50% of the total units approved in a condominium complex.
  • Commercial space in the complex cannot exceed 35% of the total square footage.

The National Association of Realtors® applauded these changes to the condo approval process for FHA financing by the HUD. They see this as a significant move towards increasing the number of people interested in purchasing a condo. The ability to use FHA home loans for a condo is sure to be appealing for more buyers who want to take advantage of the benefits that come from the FHA.

 

What are FHA Home Loans?

Federal Housing Administration loans are home loans that the Government guarantees, protecting lenders if borrowers default on their loans. Additionally, FHA home loans can be more flexible with their eligibility requirements due to that extra protection level. Therefore, FHA home loans are perfect for first-time homebuyers who might not have the credit history or savings required for most conventional loans.

A big part of the appeal for FHA home loans is the flexible eligibility requirements which include:

  • A two-year history of steady employment.
  • A valid social security number.
  • Legal residency in the country.
  • Must be of legal age, which in most states is 18 years old.
  • Down payment of at least 3.5%.
  • A FICO credit score of at least 580, although some lenders will go even lower.

Applicants who just went through bankruptcy can also use FHA loans. However, FHA home loan requirements for bankruptcy recipients will be different since they usually require a waiting period between the loan application and the discharge date.

Once an applicant is eligible for an FHA home loan, they will enjoy the FHA’s several significant benefits. These include the previously mentioned 3.5% down payment, which is much lower than the 20% commonly required by conventional loans, lower FHA closing costs, and low monthly payments. Moreover, the loan is also assumable, meaning that if the original buyer decides to sell the property, a new buyer can assume the home loan.

 

Conclusion 

The ability to use an FHA loan to finance a condo will surely raise their demand, leading to an increase in available inventory. The HUD currently estimates about 60,000 more units will be eligible for FHA financing due to these changes. The likeliness that condo prices will become more firm as more buyers consider condos a potential future home.

Phil Georgiades is the CLS for FedHome Loan Centers, a brokerage specializing in first-time home buyer loans. Phil has more than 22 years of experience working in real estate.

Finance

HOW FINANCIAL SERVICES BRANDS CAN TRANSFORM THE MUNDANE INTO MAGIC

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By

Ben Williams, Global Chief Experience Officer at R/GA London

 

We are living through an era of generational change. The last twelve months have been defined by uncertainty, and as we stepped into uncharted territory we witnessed society shift and consumer behaviour change occur at breakneck speed.

For businesses, the speed and scale of this change has felt at times daunting. There are questions at every corner. How do we navigate working from home? When will we return to normal? How are the lives of our customers changing? How are the lives of our employees changing?  What are the rules of the new normal? How does this affect our proposition? Are we changing fast enough?

But just as uncertainty creates anxiety, change creates opportunity.

To help financial brands and the commodities industry navigate this uncertainty and focus on opportunity, we at R/GA have highlighted five key areas of focus. These pillars allow financial services and commodities brands to transform the mundane into magic, adapting to surpass consumer expectations and rise above the competition.

 

View your brand as an operating system

The core DNA of a brand shouldn’t just be a poster in the cafeteria, or slapped onto a brand’s website and as a message to the world. The brand’s active purpose should truly inform all the different ways a brand shows up, across physical and digital and inform things like service offerings, business decisions, as well as marketing messages. Those words in a mission statement should mean something, and be proven in how a business operates and engages with people. With consumer expectations at an all-time high, people expect it. The world expects it.

 

Understand the power of experience and use it to differentiate 

Don’t underestimate the power of an elevated experience – regardless of industry. By focusing on the needs of your people, customers and employees, challenges quickly open up and become areas of opportunity.

Creating a category defining experience often means looking outside of your own category – just as consumers will do. When a service or experience is elevated in any category, it has a huge impact on expectations of people. This experience sets the bar, and consumers will then expect similar levels of service, innovation and thoughtfulness to be applied to all aspects of their life from any brand they interact with. When people see something better, they want everything to be better. This is the concept we call ‘Service Transference’ – and it is defining how brands are experienced in the modern world.

Commodity based industries have a huge opportunity to differentiate themselves from their competitors through an elevated and differentiated experience when engaging with the brand, product or service.

For years, computers were a commodity, some were a little faster, some had better/minor features, but for the most part the differences were minimal. Apple changed the game by focusing on the experience. It differentiated itself beyond the speed of chips and processors. Insurance and other commodity-based industries should look to do the same. Insurance companies, as an example, could look to understand people dynamically through technology, and respond with services and experiences that can tailor solutions to serve their individual needs.

 

Innovate at all scales and for all people 

Innovation has become a term thrown around as a catch-all for teams or people thinking about what is next. Too often however, teams fall in love with the idea of being credited and becoming famous for the next idea that changes the world.

Instead, brands should focus on elevating some of the smaller things. This means taking a deep-dive into the fundamentals, giving time to the less sexy things, because these are often the factors which have the most impact on people’s experiences with brands and their lives.

Beyond the emotional value, there is a functional value insurance companies can, and should be delivering. The experience of engaging with an insurance brand should go well beyond filling out a form. It should know me, who I am, my goals, my personal or family situation, and adapt accordingly over time. It should respond to the world around me, and to my life as it happens. Enabling your service offering to be tailored and customized will provide real functional value that what they are paying for is exactly what they need and want. Responding to real human needs and events as they happen is the clearest way to show you care.

 

Recognise that life has changed.

Brands that can adapt and be there for people will ultimately win. Insurance is an industry founded on the principles of being there for people when life happens. And life is happening right now.

Insurance brands have to deliver emotional value by supporting customers. To do this, brands need to strike the right balance between being active and present in a customer’s life, and knowing when to get out of the way. Beyond the annual insurance payment reminder, ask yourself, “When are the other moments throughout a year, or in someone’s life that they should feel supported?”

Insurance brands have a huge opportunity to shift what they are famous for and how they show up in the world. Given the changes we have seen in consumer expectations, the industry itself and the technology landscape, insurance brands that want to win should be focusing on delivering peace of mind and offering customers agency over their own solution.

 

Always dream big and act small

For commodities businesses, the opportunity for blue sky thinking is massive. But don’t forget that often the most meaningful change comes from innovating some of the smaller, more foundational pieces of your business and experience. The impact you can have on someone’s life, especially at times when they most need support, should never be underestimated – or mismanaged from an experience perspective. Listen to people, their needs and what they want. Your customers, and the world will thank you.

 

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Finance

TECH TRENDS: THE FUTURE OF FINANCE IS DIGITAL

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By

Simon Bull, Sales Operations & Business Development Manager, Aqilla

 

Everywhere you look across the modern working environment, there is pressure to ‘digitally transform’ by using technology in areas where manual work and processes have previously been the preferred option. Despite growing momentum in general, progress across the finance function has been somewhat slower than other core areas of business, not least because it is highly regulated and teams must exercise caution to ensure introducing change does not also introduce risk.

One familiar scenario is the approach finance departments take to storing data, particularly any sensitive information, on their own premises and their own hardware. While keeping valuable assets such as this close to hand offers a strong sense of security and control, it illustrates the limitations finance teams face in changing traditional approaches and, as a result, the relatively slow pace of technology-focused innovation overall.

However, the case to embrace tech-led change is becoming irresistible, with businesses everywhere highlighting a huge range of digital transformation benefits, from cost savings and technology performance to IT security and compliance. In the current environment, many finance teams have also experienced first hand the impact of digital transformation, with remote working bringing new technologies and digital services into focus.

Simon Bull

But, where are we heading? As digital transformation gains momentum across the finance function, where should teams be looking for opportunities to update manual processes or to replace outdated technologies? And where might the trends at the heart of this movement – such as cloud computing – have the biggest impact on the day-to-day experience of finance professionals?

The role of cloud computing raises a key point. For finance teams, digital transformation also requires a change of mindset, perhaps best illustrated by a willingness to move away from outdated in-house technology infrastructure and software products to flexible and more financially efficient cloud-based services. In doing so, it becomes possible to focus on opportunities and priorities:

 

Cost savings

One of the most important is the cost of technology. The cloud-based Software-as-a-Service (SaaS) approach that can offer users the convenience of a monthly pay-as-you-go payment model for a range of key technologies, such as accounting software. This is in contrast to traditional IT procurement models where businesses have to invest significant sums in one-off software purchases. What’s more, because SaaS users typically only need access to a laptop and internet connectivity to use cloud-based applications, it also saves money on the server hardware that has previously sat in the corner of the office, and in fact, it may no longer be needed at all. In selecting cloud-based finance software services, organisations should always compare pricing from several providers to make sure they are getting the most competitive deal.

 

Technology Performance

Today’s cloud-based finance software solutions are available with a growing range of options, starting with simple, entry-level functionality to the opposite end of the scale to products offering powerful performance designed to fit the needs of even the biggest and most complex finance departments. Important features and functions to look out for should include: extensive analysis, proper periodic management and business calendars, multi-currency, multilingual and multi-company operation, full VAT handling International coding, tax and language flexibility, automatic reconciliation / bank integration, built-in key performance measurement, advanced search, selection and drill-down, document and image scanning.

 

Stronger security

Many cloud providers now have security at the top of their list of capabilities, but checking their accreditations, policies and security track record should always form part of any selection process. This should include areas such as data protection, backup services and their ability to deal with common security issues, such as ransomware.

 

Service standards

When looking at cloud service providers, finance teams should also focus on the quality of service on offer. At its best, cloud-based customer support and service can deliver an outstanding experience where the provider really feels like an extension of the in-house IT Team. The best way to check on the service capabilities of any cloud provider is to ask for references from existing customers, check online reviews and evaluate their Service Level Agreement (SLA) to understand the small print of any terms and their impact on service levels.

 

Compliance

Compliance is front of mind across the finance function and is an area where the specialisation offered by many cloud software solutions can be of huge benefit. Even for the most niche requirements, there is often a software provider out there who has a solution designed to meet very specific needs, and in embracing these technologies, the efficiency and accuracy benefits can be truly transformational.

The challenges seen across the economy over the past 12 months have significantly accelerated the pace of technology-led change, finance teams included. But, cloud-based finance software services can help teams to widen their approach to innovation, embrace the flexibility offered by remote working on a permanent basis and deliver a range of operational and customer-focused benefits for the long term.

 

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