If any of you Realtors have any clients looking to buy or sell a condo in the next year, or if you are a prospective home buyer looking for a condo, this will affect you. Condo buyers who have less than 20% down and/or are looking to use an FHA loan on a condo will be very limited in financing options. There are 4 key dates to remember:
Now: Less restrictive guidelines now through most of 2010, except for Spot approvals.
1/31/10: Spot approvals eliminated.
12/7/10: Condo project removed from FHA approved list.
1/1/11: Permanent, more restrictive guidelines go into affect.
Highlights
Spot Approvals - Spot approvals are when FHA allows a single condo unit to obtain FHA financing, even though the entire complex is not FHA approved. FHA will allow Spot Approvals through 1/31/10. To obtain a spot approval, have your buyer contact me to get an FHA case number on or before 1/31/2010. Obtaining a case number takes 10 minutes and requires some personal information and a property address. Once your buyer obtains a case number, they can get a spot approval for their desired condo unit, even if they close after 1/31/10.
Speaking of Condo Project Approvals....Starting 12/7/2010, all condo projects that obtained FHA approval before 10/1/08 will be removed from the approved list. Yes, it means that all those condos approved in the past 40+ years will need to be recertified in the next approximately 12 months. Re-approving a project could be a lengthy process and may require a reserve fund study. Be aware that this could make it almost impossible to sell a condo listing starting next December. If/When a condo project is approved, it must be re-approved every 2 years going forward. Contact me to obtain a list of needed documentation to approve or re-approve a condo project.
Concentration of FHA loans in a project - For case numbers ordered prior to 1/1/11, FHA will allow up to 50% FHA concentration*, meaning 50% of the condo units in a project can have FHA financing. Starting 1/1/2011, the FHA concentration limit will be reduced to 30%. The HUD website will post concentration percentages for each condo project.
* 100% concentration may be allowed under certain circumstances. Contact me for a list of requirements.
Owner Occupancy - For projects that are proposed, under construction or still in their initial marketing period, FHA will allow us to calculate the 50% presale based on pre-sold units. REO units may be excluded from the calculation. This is a temporary change that only applies to case numbers ordered before 1/1/11.
Pre-sale - The required pre-sale for New Construction projects is temporarily reduced from 50% to 30% for case numbers ordered before 1/1/11. It will increase to 50% on 1/1/11.
Some Good News - Fully detached dwellings that are legally considered condos do not need FHA approval to obtain financing. Two-unit condos are now eligible. "Vertical Phasing" of at least 5 floors will be allowed on high rise condo projects.
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