New Law Relaxes Rules around FHA Financing for Condos
Recently, some impactful events took place affecting the national condo market.
In a rare bi-partisan move, Congress voted to ease FHA financing restrictions for condo buyers.
That’s huge news for anyone looking to buy, sell, or a condo.
Here’s what you need to know…
Strenuous Guidelines Had Taken Their Toll
In order for a borrower to obtain an FHA loan and purchase a condo, the condo building must be approved by the FHA.
Old guidelines for retrieving certification were very strict – so strict that over time, the number of approved condos had dwindled to only 14,000 of the 152,000 condo associations in the US.
Every two years condo associations had to jump through hoops in the complicated process of FHA re-certification.
At this point, many have chosen to avoid the process altogether.
The revised law hopes to reverse this trend.
More Renters Will Be Permitted
New legislation will permit buildings to have a 35% owner-occupancy ratio, down from the previous 50% benchmark.
This means 35% of the building’s owners will have to occupy the condo as their primary residence.
It’s a key component of the bill since the housing bubble resulted in a large number of condo owners being underwater.
The result was higher normal owner-investor ratios.
Commercial Renting Could Get a Boost
Condo buildings can sell units to not only residential owners, but also businesses.
However, the FHA considered much of these commercial component excessive and deemed many buildings ineligible because of it.
Going forward, decisions will be judged on a case-by-case basis and allow for more commercial use.
Certification Process will be Streamlined
As part of the new regulations, congress has also prompted the FHA to streamline its certification process.
It should help urge condo associations to apply for certifications, as again, many had just decided it wasn’t worth the effort.
Transfer Fees Will Be Ok’ed
Small transfer fees (from the condo building) charged at the time of were once disallowed in the event of an FHA transaction. These fees will now be permitted.
The End Result
As you can see, the passing of a bill most will not even notice could have a long-lasting effect on those living at or currently in search of a condominium.
Have you dealt with any issues as a condo owner due to the old regulations?
Are you an FHA borrower likely to consider buying a condo now that more options will be available to you?
Let us know in the comments below and/or feel free to contact us with additional questions.