FHA Issues New Condominium Approval Rule
With new guidelines set to become effective on October 15, 2019, condominium financing will become more accessible for FHA borrowers. Previously, to finance a condominium unit with an FHA loan the condo project had to meet approval requirements. With the new policy, individual condo units that are not part of an FHA-approved condo project can still be eligible for FHA financing. The policy change is a response to the need for more affordable options for first-time home buyers in today’s competitive market.
“Today we are making certain FHA responds to what the market is telling us. This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium,” said HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery.
From the Department of Housing and Urban Development’s Release:
FHA's new condominium policy is part of a broader Administration objective to reduce regulatory barriers that currently restrict affordable homeownership opportunities. FHA's new rule:
Introduces a new single-unit approval process to make it easier for individual condominium units to be eligible for FHA-insured financing;
Extends the recertification requirement for approved condominium projects from two to three years;
Allows more mixed-use projects to be eligible for FHA insurance
Many first-time home buyers choose to purchase a condominium because they tend to be priced lower, and thus have a lower down payment than detached single-family homes. They are low maintenance in terms of landscaping and exterior needs, many include community amenities like a gym or pool, and depending on the Homeowner’s Association (HOA) they could be a good investment property to rent out if the homeowner chooses to move to a larger home.
If you have any questions about the policy changes, please let me know.
Sources: Forbes, HousingWire, HUD.gov