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FHA Loan Requirements Become More Stringent for Condos

By
Real Estate Agent

 

 

 

There have been requirement changes for FHA Condo Loans.  The rule changes implemented in February 2010, have an impact on condominium and townhome developments, which require an FHA loan for purchase or refinance.  FHA approval must be granted for an FHA loan to occur.  Spot approvals of individual units, are no longer permitted.


As of January 1st 2011, the FHA requirements for condominium developments became even tougher.  The additional eligibility requirements at the time of underwriting for an FHA loan include the following:

  • A property's total floor area used for commercial purposes cannot exceed more than 25 percent in a project.
  • The total number of units owned by one investor, cannot exceed 10%.  This applies to developers and builders, which subsequently lease or rent vacant and unsold units.
  • The total number of units in arrears (past due more than 30 days) must not exceed 15% of their condominium association fee payments.
  • The minimum of 50 percent of the total units must be sold before endorsement of the mortgage in the case of construction.
  • A minimum of 50 percent of units must be sold to owners who intent to occupy the units, or be owner-occupied.  For construction projects under construction or proposed, and still in initial marketing phrase, FHA will allow a no less than 50 percent of the pre-sold units.  Presale requirements still maintain a 50% minimum.
  • No more than 50 percent of a condo project will be insured by FHA.  In the case where projects consist of three or fewer units, FHA will insure one unit.

Because of these new and more stringent requirements, the California Association of Realtors (C.A.R.) has launched Clarus FHA Approval, via C.A.R. subsidiary, Real Estate Business Services (REBS).

The Clarus FHA Approval services also includes a database which allows C.A.R. members to determine FHA loan eligibility status by individual property address. 

This service will assist members and FHA clients in avoiding failed transactions and non-recoverable costs due to unknown FHA status for loan eligibility.

Further details about this service can be found at:

http://clarus.getfhaapproval.com/CLARUSFHA-Approval.pdf or call (818) 338-6588. 

Posted by

Myrl Jeffcoat ActiveRain Signature
  

Comments (9)

Henry Pailles
Chula Vista Realtor,Short sale,Eastlake Real estate,Realtor - Chula Vista, CA
San Diego Real Estate, San Diego Realtor, Chula Vista Real Estate

Great information, thank you for sharing, this can save us a lot of grief, lending keeps on getting tougher. Good luck

Mar 24, 2011 01:51 PM
Patrick White
Home Driven Realty, Inc - Baldwin, NY
Driven to bring New Yorkers home

Good Evening Myrl

Thanks for the post and FHA Loan Update. Have a great day.

Mar 24, 2011 01:52 PM
Richard Iarossi
Coldwell Banker Residential Brokerage - Crofton, MD
Crofton MD Real Estate, Annapolis MD Real Estate

Myrl,

A lot of agents...and buyers got caught by these requirements at the beginning of the years. Condo associations around here aren't that forthcoming about their ratios.

Rich

Mar 24, 2011 01:53 PM
John Saari
Worcester, MA
"The Mortgage Buddy"

Fantastic post. This information can save time, money, and home ownership. Thanks for sharing.

Mar 24, 2011 01:58 PM
Rodney Mason, VP of Mtg Lending
Guaranteed Rate NMLS# 2611 - Atlanta, GA
AL,AR,AZ,CA,CO,FL,GA,IN,MI,MS,NC,SC,TN,TX,VA,WA

Whenever purchasing a condo, you do have to first look into the project's eligibility.  If the project is not FHA approval, there are a few us out there who are authorized by HUD to issue DELRAP approvals.

Mar 24, 2011 02:46 PM
Jack Mossman - The Nines Team at Keller Williams in Stockton
The Nines Team At Keller Williams - Stockton, CA
The Nines Team at Keller Williams in Stockton

Myrl ... the occupancy ratio on ownership needs to be reviewed, IMHO.  Affordable units with 51% investor owner - and the opportunity for affordable purchase is mostly now only available to investors.  While I understand the issues ... there must be some adjustments ... or they will eventually become renter properties ... and affordable inventories for first-time buyers and lower income buyers will cease to exist.

Mar 24, 2011 04:45 PM
Elizabeth Weintraub Sacramento Broker
Elizabeth Anne Weintraub, Broker - Sacramento, CA
Put 40 years of experience to work for you

I just sent your link to an agent who made an offer on one of my short sale condo listings. Need to make sure her buyer can actually GET the loan her buyer is applying for after I spend 2 months fighting with the banks. So thank you for posting this, Myrl. Nice to have all of this information in one spot!

Mar 25, 2011 05:53 AM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Henry - I agree these are difficult times for lending.

Patrick - You're welcome.  I hope you have a GREAT weekend!

Richard - Finding those ratios hasn't been an easy task.  Hopefully Clarus will help in that.

John - Saving time and energy certainly should be saved with these developments.




Mar 25, 2011 01:54 PM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

Rodney - That's important to know!

Jack - I agree 100% with you about the ratios.  If there are too many rentals in a condo development, it's nothing more than another apartment complex.

Elizabeth - I am hopeful that the link will be helpful!

Mar 25, 2011 01:56 PM