On Wednesday, August 14, 2019, the Federal Housing Administration issued an update to its condominium rules, which go into effect October 15, 2019. The FHA said it expects the updates, which are intended to improve access to affordable and sustainable housing, will allow an estimated 20,000 to 60,000 more borrowers to qualify for condo loans.
Some of the key changes to the guidelines include:
- An individual condo unit in a building of 10 or more units may be eligible for spot approval if no more than 10% of the units are FHA insured. For units in buildings with fewer than 10 units, no more than two units can have FHA insurance.
- The recertification deadline for approved condo projects is extended from two to three years.
- FHA will insure more mixed-use projects, or those with more commercial space. Approved projects can now have up to 35% of their square footage dedicated to non-residential use.
- The FHA loosened owner-occupancy rules, stating that eligible condo projects can now be just 50% owner-occupied.
- The FHA will insure up to 50% of units in any given project.
According to the FHA, only 6.5 percent of the more than 150,000 condo projects across the country are currently approved for FHA financing. These new guidelines could significantly enhance the pool of borrowers eligible for FHA loans.
Due to their lower average price point, condominiums serve as a vital source of affordable housing, particularly as a gateway for first time home buyers entering the housing market. This change will make it possible for a much larger number of people to become homeowners.
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