Here’s some good news for first-time homeowners and condominium associations.
A revised Federal Housing Authority rule now allows FHA-insured mortgage loans for first-time buyers, if a condominium community meets certain guidelines. It also encourages and allows condo associations to get certified more easily so members can qualify for the low rates.
For new buyers, that means a better chance at a low mortgage rate. Condominiums are often the gateway to homeownership, according to the Community Association Institute, a trade group that was actively advocating for the changes. Condo sales, like other segments in the housing sector, suffered a big blow because of the economic downturn, rising unemployment and strict lending practices.
“The revised standards will permit the sale of more homes, many of them vacant from foreclosures or people just walking away from their mortgages and their condominium assessments,” says Frank Rathbun, vice president of communications at CAI. “This shortfall has put a serious financial strain on countless condominium associations.”
Without this important financing, condo associations have difficulty attracting new buyers and members.
Federal rules require FHA certification for the entire property for individual units to be eligible for financing. The certification process takes into account budgets, future capital improvement needs, delinquent association dues, number of renters versus owner occupants and other factors.
The revised rule will go a long way in attracting new buyers and helping sellers, Rathbun says.
Among the notable changes:
• Increased investor-ownership limit: An investor or entity can now own up to 50 percent of units in existing projects. Previously, a single investment entity could own only 10 percent.
• Increased percentage of non-residential commercial use: There’s a 25-percent limit on percentage of space used for commercial or non-residential purposes, but exceptions up to 35 percent or more can be requested in some mixed-used developments.
• One of the most significant changes is condo associations where 15 percent of unit owners are 60 days behind on condo fees can now apply for certification. Previously, no more than 15 percent members could be 30 days late.