After close to a decade of working with the U.S. Department of Housing and Urban Development, they have finally released updated guidance on FHA-insured condominium financing. The new rules should benefit your real estate clients and customers by allowing more buyers to obtain low down-payment mortgages on affordable housing options. Specifically, the new rules will:
• Extend FHA certifications on condo developments from two years to three years, reducing the compliance burden on condo boards.
• Allow for single-unit mortgage approvals—often known as spot approvals—which will enable FHA insurance of individual condo units, even if the property does not have FHA approval.
• Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building.
The full guidance will go into effect in mid-October, 60 days from publication. “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people,” President of NAR, John Smaby said this week. Meanwhile, Lawrence Yun, chief economist at the National Association of Realtors, said the new rules could help stimulate demand from more moderate-income buyers and boost the housing market late in the cycle. Still, he said that unless builders shift from building luxury apartments to condos, supply shortages at the lower end will persist.