FHA has gone back and forth for months on implementing new guidelines for lenders that are making FHA loans on condos and townhomes. These rules have very powerful implications for the entire U.S. condo market, as FHA is becoming the #1 source of financing for home buyers in the U.S.
The latest rules from FHA are temporary for through the next year as a response to the current housing situation in the U.S. Here is a summary of some of the changes they have made. These changes will help more condo projects qualify for FHA loans:
1. Condo “spot approvals” are still available through February 2010
This is a very important extension. Condo projects that are not already on the FHA approved condo list need to either get on the list or get a “spot approval” for the single unit a borrower is trying to buy. This extension allows FHA buyers to get a condo they want to buy approved even if not on the FHA approved condo list. Getting the project on the FHA approved condo list is a more involved process than just getting a “spot approval” Please call or email if you have questions about spot approvals.
2. FHA will now allow 50% of all the condo units to have FHA loans on them, in some cases 100%
Previously FHA was only allowing 30% of all units to have FHA loans.
3. New condo developments only 50% of *pre-sold* condo need to be owner-occupied or intended to be owner occupied
FHA still has a rule where 50% or more of the units have to be owner occupied. With new condo developments where the entire projects have not sold out yet, only 50% of the units sold so far have to be owner occupied or intended to be owner occupied.
4. REO/Bank Owned properties that are vacant or tenant-occupied are not counted in the owner-occupancy figures
This is important because as stated above, the #1 rule the prevents FHA from financing condo units is that less than 50% of the condo units in a project are owner occupied. This exception will not count REO/bank owned units in these figures and will thus help condo projects with a lot of bank owned properties pass the occupancy % test.
So there you have it, so very recent changes from FHA regarding condo loans. These changes will help more buyers get into condo’s using FHA loans. There is a lot more to FHA condo approvals as they can be very complicated.
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
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