It may be time to take a second look at condo projects that were previously off-limits for FHA loan approval. Up until now, at least 50% of the units in an existing condo project needed to be owner-occupied in order to qualify for a loan insured by the Federal Housing Administration (FHA). The reason for this requirement is FHA believes that owners who live in their condo unit tend to be more incentivized to take care of the their units and the overall condo project vs. renters or investors. However, in response to a new law passed earlier this year, FHA has lowered their owner-occupied requirement on existing condos from 50% to 35% as long as these conditions are met:
- Borrowers have to apply for a formal exception;
- No more than 10 percent of the total units can be more than 60 days past due on their condo association dues;
- The condo association has to show adequate financial reserves for capital expenditures and maintenance (at least 20% of the budget); and,
- The condo association has to provide 3 years of financial records.
This is great news for many homebuyers, especially in light of the low housing inventory challenges being faced in today’s market. Contact me for further info, or if you’d like to take a second look at a condo project that was previously off-limits for FHA financing.