FHA Mortgage Guidelines Update for Condos
By: Rosemary Rugnetta | September 19th, 2012
The Federal Housing Administration (FHA) has issued new mortgage guidelines for condominiums which will help stabilize these communities. As a result of the housing crisis, condominiums have suffered a major setback as community associations found it difficult to meet FHA’s guidelines.
Under the new temporary changes announced with Mortgagee Letter 2012-18 dated September 13, 2012, investors can now buy up to half of the project units. This is a major increase as compared to the 10% that was previously in effect. With the new rule, at least half of the units have must already be conveyed to individual owners or already be under contract as owner occupied.
Until now, only one-quarter of a project was allowed for non-resident commercial space. With this mortgagee letter, 50% of the project can be devoted commercial usage, although approval from FHA may be necessary.
A significant change is related to any delinquent homeowner’s association dues (HOA). Up to 15% of the project’s units are allowed to be 60 days delinquent on HOA due as compared to the previous 30 days restriction.
Owner occupancy limits remain the same for FHA condo refinances; half of the project units must be owner occupied. If the unit is an REO, then the 50% rule is waived. Still remaining is the number of units that can have an FHA backed loan. As it stands, only 50% of the units can have FHA financing at any given time. The once popular “spot approvals” rule was eliminated and is still prohibited. This means that at least 30% of the units in a new condo project must be pre-sold before an FHA mortgage application will be approved.
While these changes are not going to change the condo situation overnight, FHA said that it is preparing more formal and comprehensive rules. The National Association of Realtors continues to talk to FHA officials in the hope that even more condominium rules can be changed to help this sector of the real estate market see a recovery.
Joel Lobb (NMLS#57916)Senior Loan Officer
502-905-3708 cell
502-813-2795 fax
jlobb@keyfinllc.com
Key Financial Mortgage Co. (NMLS #1800)*
107 South Hurstbourne Parkway*
Louisville, KY 40222*
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