New
FHA Condominium
Guidelines
Somerset, NJ -
December
11, 2009 - FHA Guidelines are tightening for
Condominiums because of a decrease in funds according to Bishoi Nageh, Owner
and President of Equity Source Home Loans Somerset Branch.
The
Federal Housing Administration (FHA) is implementing a new stricter approval
process for condominiums to be eligible for FHA financing. Under revised guidelines,
this is set to go
into effect November 2, 2009. These new
FHA guidelines will slow down condominium mortgage financing, and negatively
impact first time home buyers for condominiums.
For
those who are not familiar with FHA, it is a government program designed to
help more people buy homes. Typically,
more borrowers qualify with FHA financing than with conventional financing. The
program requires only a 3.5% down
payment, the credit standards are much looser, and the mortgage rates are
typically better.
New
Project Eligibility Guidelines
All
condominiums (consisting of 2 or more units) must meet the following
requirements:
• At
least 50% of the units of a project must be owner-occupied or sold.
•
Projects must be covered by hazard and liability insurance and, when
applicable, flood insurance.
• No
more than 15% of units can be in arrears of their condominium fees.
• No
more than 25% of the property’s total floor area in a project can be used for
commercial purposes.
• A
current reserve study must be performed to assure that adequate funds are
available for the funding of capital expenditures and maintenance. The
regulations don’t define what is “adequate” but guidance may be found in the
new Fannie Mae guidelines which mandate at least 10% of annual operating budget
in reserves.
• No
more than 10% of the units may be owned by one investor.
•
Rights of first refusal are permitted unless they violate discriminatory
conduct under the Fair Housing Act.
• An
affirmative action-type housing plan is required for both new construction and
conversions.
•
Previously certified projects must re-apply every 2 years.
Does
this mean the option to purchase condominiums will lessen over time?
These
new rules may not hinder one from a purchase but you will need your lender to
verify your condo complex before you are in contract or start the loan process.
According
to Bishoi, “This will decrease the amount of condo complexes that qualify for
an FHA loan; the best way to know is by having your management company complete
a questionnaire by your lender.”
Bishoi Nageh
President
Equity Source
Home Loans, Somerset Branch
866.940.1365
Mon-Fri 9am-7pm
bnageh@equitysource.com
