Condo rules relaxed by FHA
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Even though the rules were meant for condo developments, this also applies to individuals looking to buy and sell condos.

I have previously told my students not to bother with condos unless it was owner financing or subject because it if you think it is tough to get a loan for a single family house, you should see what’s like for a condo, It ain’t happinin.

When you are buying a condo, and thinking of reselling it with FHA financing, you have to make sure that the development has FHA approval. In addition, you need to check the financial status. How many people are not paying? How many are empty? What kind of reserves does it have?

The first problem of getting FHA approval has become easier. FHA has now relaxed the rules.

There is now greater flexibility on investor ownership. In existing developments, one or more investors are now allowed to own up to 50% of the total units provided that at least half of the units are owner-occupied. The previous rule required that no more than 10% of units could be owned by a single investor.

Now condo communities where no more than 15% of unit owners are 60 days late on payment of dues can be approved for FHA loans. It used to be 30 days.

Certain insurance requirements are easier.

For example,  before, FHA prohibited insurance of units in buildings where more than 25% of the total floor space was used for commercial or nonresidential purposes. It’s common in urban areas to have lower floors devoted to retail stores and offices that generate revenues that help support the entire project. Many of those buildings suddenly found themselves ineligible for FHA financing for residents. The revised rules allow exceptions of up to 35% commercial use, and provide for additional case-by-case exceptions to 50% or higher

 

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Comments

Condo rules relaxed by FHA — 2 Comments

  1. Phyllis – Great Post! I deal with this all the time. Getting buildings approved takes work, it could be a few weeks to a few months to get the whole complex FHA approved . If it makes sense, the seller or buyer sometimes pays the application fee or late hoa dues. One great resource to look condos up is the HUD website
    https://entp.hud.gov/idapp/html/condlook.cfm

    Always check the Expiration Date. “Expired” is the same as “not approved” They have to resubmit the application again

    Even if it’s not FHA approved for an easy flip. You can still sell it with conventional financing, lease it or sit on it as a cheap rental for double digit returns on your investment!

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