In assistance to condominium homebuyers, the Federal Housing Administration (FHA) finalized new regulation this week, expanding FHA financing to individual units, among other provisions. According to FHA, 20,000 – 60,000 condominiums could become eligible for FHA financing as a result of the rule, which “is part of a broader Administration objective to reduce regulatory barriers that currently restrict affordable homeownership opportunities.”
“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families, and it’s critical that FHA be there to help them,” said U.S. Department of Housing and Urban Development Secretary Ben Carson 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.”
“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 HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery.
Beginning October 15, FHA can consider condominiums for financing individually, even if the agency has not approved the condominium development overall. If the development has 10 or more units, FHA caps eligibility at 10 percent; in developments with less than 10 units, the FHA maximum is two.
For approved condominium developments, the recertification requirement is stretching to three years, instead of the current two. Additionally, FHA changed its owner-occupancy ratio requirements, allowing for more opportunities.
“The condominium market is a critical gateway to affordable homeownership, and MBA applauds the steps FHA has taken to increase borrowers’ accessibility to quality housing,” said Pete Mill, Mortgage Bankers Association senior vice president for Residential Policy and Member Engagement, in a statement. “The new guidelines, many of which MBA advocated for, will create more financing options that will help first-time homebuyers and low- to moderate-income borrowers. It will also provide lenders with much-needed clarity to promote safe, sustainable and affordable lending.”
“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 John Smaby, National Association of REALTORS® president, in a statement. “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.”
According to June NAR statistics, condominium sales sunk 6.5 percent year-over-year. Prior to the regulation, 6.5 percent of condo developments were eligible for FHA financing.
Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at email@example.com.