Living in a condo carries a certain lifestyle with it – no exterior maintenance to worry about, shared amenities and a bit of a feel for communal living – and for many people, that type of lifestyle is a great fit, especially for younger first time home buyers. The problem in recent years though has been that it’s been terribly difficult to get into a condo if you were using an FHA-backed loan to make the purchase, because so many condominium projects were not on FHA’s approved list of complexes that qualified for FHA financing. And with more than half of first time home buyers, and a quarter of all buyers, using FHA loans to make their purchase, that’s been a problem.
Well, as of yesterday buying a condo using an FHA loan just got easier because a revision to FHA rules now allows more condominium projects to qualify for FHA financing than before.
The most significant change extends the policy on delinquencies: no more than 15 percent of the total units in a complex can be more than 60 days past due on assessment payments. Previously that limit was 30 days past due.
Additionally, a single entity can now own up to 50% of the units in the complex, provided that at least 50% of the other units are owner-occupied or under contract to be owner-occupied. Previously the limit was 10%. This is important in new developments or projects that have been recently converted from apartments where the developer owns the majority of the units, or in situations where a bank owns multiple foreclosure units.
Another change allows for greater commercial enterprise in mixed-use developments. Previously only 25 percent of the total floor area in a development could be used for commercial purposes. Now case-by-case exceptions can be made for associations whose commercial space takes up to 50 percent of the total floor area.
It’s always a good idea to check if a condominium project qualifies for FHA financing, even if you’re using conventional financing or paying with cash. That’s because selling a unit in an FHA approved complex opens the sale of your condo to a wider market and therefore more potential buyers. Now that the rules have changed, even if a complex is not approved for FHA financing, you might want to see if it would under the new rules and if the association plans to seek that approval.
Need to see if a condominium association is FHA approved, perhaps, for example, a South Waterfront condo in one of Portland’s newer, highly coveted neighborhoods? You can do that at the Department of Housing and Urban Development’s (HUD) website here.
Source: Chicago Tribune | New FHA Rules Loosen Assocation Requirements