A much-anticipated update to FHA (Federal Housing Administration) for the purchase of condominiums has finally arrived. In August 2019, the FHA issued the long-awaited changes to the condominium guidelines which includes bringing spot approvals back and a push to loosen the eligibility requirements is underway.
Under the new guidelines, the FHA is anticipating that the updates will allow the qualification of an additional 20,000 to 60,000 condominiums each year.
A new approval rule by the FHA includes comprehensive revisions to the policy that will encompass the approval of single units in non-approved condo projects.
This will help promote affordable homeownership for first-time buyers who are credit-worthy and was created to be more flexible and to concede with market conditions.
The new rules went into effect on October 15, 2019 and are part of a larger objective by the FHA to decrease the number of barriers that were restricting homeownership opportunities that are affordable options for first-time homebuyers. The new guidelines include:
- A new single-unit approval process was created to make it easier for individual condominium units to become eligible for insured-financing through the Federal Housing Administration.
- For approved condominium projects, the new guidelines allow the recertification process to increase from two years to three years.
- The new rule allows for an increase in the mixed-use projects to be eligible for FHA insurance.
According to an article, “FHA Issues New Condominium Approval Rule,” published in August on the HUD (Housing and Urban Development) website, Ben Carson, the United States Housing and Urban Development Secretary, recently said that condominiums have become an increasingly affordable and sustainable option for homeownership for many families.
“It’s critical that FHA be there to help them,” said U.S. Housing and Urban Development Secretary Ben Carson. “Today, we take an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”
The article also quotes HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery who said that the new guidelines are making certain FHA responds to the information the market is providing.
“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 Montgomery.
According to a recent study by HUD, about 84 percent of condo buyers insured by the FHA have not previously owned a home. Out of 150,000 condominium projects in the United States, only about 6.5 percent were approved under the former guidelines of the FHA. The updated rule will allow an increase in the number of condominium projects that can be approved by the FHA.
The National Associations of Realtors has been pushing for a change in the FHA requirements for change in FHA requirements for over 10 years to allow more opportunities for prospective homebuyers.
John Smaby, president of the National Association of Realtors (NAR), recently said that the ruling is the result of years of collaboration between HUD and NAR and will help stop the decline in condominium sales. This is great news for prospective homeowners across the country.