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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
New FHA Condo Approval Guidelines
If you are looking to buy a condo within FHA approved condos, the new FHA rules might help you especially if you are a first-time homebuyer.
Condos and townhouses are generally more affordable. There was information stating that the FHA was going to loosen some guidelines.
In this post, we will learn new FHA condo approval guidelines and how they can help borrowers.
FHA loans are government-insured loans used by a lot for first-time buyers because you can buy the property with as little as a 3.5% down payment.
Before the new update in guidelines for buying FHA approved condos, there were some significant restrictions.
If you were to buy a condo and say that you were approved for a certain amount by FHA to buy a condo, the realtor could only show you the condos which were approved by FHA.
Occupancy Ratio Requirement Change
According to a survey in 2018, there were a total of 8.7 million condo units nationwide out of which only seventeen thousand condos were assigned as FHA-approved condos.
People who were buying condos were not going thru FHA because of the requirements.
The requirement that was necessary to qualify a condominium complex as FHA approved condos was, the ratio of people that own and live in those condos has to be at least 50% of all of the condos in a particular complex.
Condos are very appealing to investors because of the high rental demand and so a lot of these condo complexes in major cities are owned majorly by investors and they are renting them out.
This ends up messing up the occupancy ratio and makes it hard for somebody that wants to buy and live in the condo by getting an FHA loan.
If the occupancy ratio is not up to the requirement the FHA won’t approve the condo complex. Since October 2019, the FHA has loosened up the occupancy ratio a little bit.
FHA is being flexible with the ratio of owner-occupants to non-owner-occupants. The occupancy ratio is lowered from 50% to 35%.
This means with the new update at least 35% of all of the owners must occupy the condo complex to get qualified as FHA approved condos.
FHA Condo Approval
Not only FHA has lowered the occupancy ratio for the condo to be FHA approved, but also have started giving spot approvals for single units.
Now after the update, FHA has allowed one time or spot approvals the same way they do conventional loans through getting a condo questionnaire.
The lenders will look at the approved list based on the buyer and if the buyer qualifies for FHA they would look at the different stats of that condo complex and then they will do a one-time spot approval.
This helps you to use your FHA loan, 3.5% down to buy a condo. For many people that could be a lower price point especially first-time homebuyers since the condos are lower priced with different amenities that look attractive.
With this update, most of the condos would be fit to be qualified as FHA approved condos. This allows any individual to get a single condo unit through FHA without the entire condo complex being approved.
This update also helps the seller to get more potential buyers for the condos.
Conclusion
Many of the first-time homebuyers can use these new rules to their benefit. Especially, if you are only looking to put 3.5% down and you want to go FHA and have a moderate budget.
The reason why the rules were loosened was that they want homeownership more available to more people with comparatively less time.
