Getting an FHA loan to purchase a condo has been a huge challenge lately. FHA loans are only available on condominiums where the entire Association has undergone an approval process. Many/most HOAs have been unwilling (and some unable) to go through FHA approval. This severely limits the pool of buyers in a market that is tough enough as it is.
The Federal Housing Administration has finally published revised rules that should encourage more HOAs to get certified. The link to the full article is below; you’ll have to scroll the bottom of the article to find these four main points.
Among the key changes now in effect:
- The investor ownership limit in existing projects has been raised to 50 percent. Previously there was a 10 percent cap on the number of units owned by any single investment entity. Now the rule states that “any investor/entity single or multiple owner entities may own up to 50 percent of the total units…if at least 50 percent of the total units in the project” are owned or under contract for purchase by owner-occupants.
- The percentage of space used for commercial/non-residential purposes in a project is limited to 25 percent, but applicants can request exceptions up to 35 percent and even above in certain mixed-use developments that are still “primarily residential” in character and where the project is “free of adverse conditions to the occupants of the individual condominium units.”
- Condo associations in which as many as 15 percent of unit owners are 60 days delinquent on their condo fees will now be eligible for certification. Under the previous rules, no more than 15 percent could be 30 days late. This was a major issue for many associations since they didnt track 30-day delinquencies. Industry groups had sought a 90 day delinquency standard.
- Previous confusion over FHA requirements on fidelity bonds for management companies — with coverage that sometimes duplicated what was already maintained by the condo association itself — appears to be resolved. If the associations fidelity bond policy names the management company as an insured or agent, it should pass muster.