New FHA Condo Rules

Here is some truly great news! FHA “Spot Approvals” on condos are back!!

What does that mean? That means that if there is a condo that is not on the FHA approved list, a good lender can still (in many cases) do an FHA loan on a condo in the complex.

While conventional loans with 3 and 5% down are often available, they can be more costly than FHA loans for those with less that pristine credit scores. FHA rates are generally lower than conventional loans with low down payments as well.

FHA loans also allow “non occupant” co-signers. FHA allows any or all of the required funds to close to be gifted. FHA has shorter waiting periods from past credit events like Bankruptcy (2 years) or Foreclosure (3 years) vs longer wait times with conventional financing.

These new rules will go into effect with FHA Case #s issued on or after October 15th, 2019.

New FHA Condo Rules

“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it’s critical that FHA be there to help them,” Housing and Urban Development Secretary Ben Carson said in a statement. “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.”

HUD believes the changes will extend critical benefits to aspiring homeowners and confirm the agency is properly serving the public.

“Today we are making certain FHA responds to what the market is telling us. 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 Brian Montgomery, HUD acting deputy secretary and FHA commissioner.

The changes are expected to help alleviate affordability concerns in markets across the country and increase the available opportunities for many more potential buyers to get their foot in the door.   This applies to both qualified first-time buyers who have faced down payment hurdles, been priced out of the starter home market or been victims of a low-inventory environment; and also to older homeowners looking to downsize but unable to find a home that makes financial sense.

The National Association of Realtors (NAR) commended the Department of Housing and Urban Development (HUD) for finalizing these new condo loan policies.

“We are thrilled that Secretary Carson has taken this much-needed step to put the American Dream within reach for thousands of additional families,” said NAR President John Smaby. “It goes without saying that condominiums are often the most affordable option for first-time homebuyers, small families and those in urban areas. 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.”

For additional information, visit the H.U.D. site.

New FHA Condo Rules