FHA has revised their FHA Condo lending rules
The agency is reducing some of the barriers when financing condos with an eye to further changes early in 2013. Some of the remaining restrictions may still be an issue though look for those to go soon.
The problem: when buying a condo, it has been difficult to obtain a FHA loan. And to make matters worse, these rules also hampered non-FHA loans because bankers would say if FHA won’t loan, then I won’t either. Perfect catch 22. Couple that with so many other FHA lending rules, loans using that agency have become very tough to get.
So what has changed in this round of FHA Condo Lending Rules?
For now, here are the four main changes:
- In mixed use developments, FHA has changed usage mix ratio from 25% to 50% mixed usage. This will open up many more condo units for FHA loans. Usage is defined as the mix of retail/commercial to housing in a complex.
- Single investors can now buy more condo units in one complex. That limit is raised from 10% to as much as 50%
- Regarding delinquent HOA dues, the rules will allow dues to be as much as 60 days overdue vs. 30 days. Again, it will be les restrictive when penalizing an HOA for not collecting dues.
- Certification Concerns. Previously, FHA required HOA board members, many who volunteer, to sign off that they had “no knowledge of circumstances or conditions” adversely affecting the building. The softened language recognizes the boards good-faith efforts to verify condo information.
What’s Ahead with FHA Condo Lending Rules?
One big change coming is the requirement that at least half of the units be owner occupied. THis item is a big deal in Palm Springs because of the many part-time winter residents here in the desert.
Next one is also big. It will soften the 50% FHA loan limit in a complex. Previously, it would only allow up to half the units to be FHA financed.
And finally, spot approvals in new complexes may come back again. These were stopped after the big housing downturn and are allowed once again. This is useful when I new development has not yet been fully approved for FHA loans.
So looking ahead, 2013 will continue to be favorable for buyers and with the new FHA condo lending rules, financing will be easier for those buyers needing a loan.