FHA Mortgage changes to San Jose Condominium Loans

Mortgage and Lending with Arcus Lending NMLS 8176

Elimination of Spot Approvals and some other major changes for FHA loans for San Jose Condominiums.

I. Elimination of “Spot Loan” Approval Process

Earlier, if a condo project was not approved by FHA, a "spot approval" was allowed just for financing one unit. Now the entire project has to be approved by a Direct Endorsed Lender (process called DELRAP) or directly by HUD (process called HRAP). With all the liabilities involved around the process most of the direct endorsed lenders would prefer HUD to directly approve the project. This can cause major delays at 2 ends:

  1. Collecting all the required documents from Home Owner's association (HOA)
  2. HUD's review of those documents to approve/reject the project

Dont be surprised if FHA loans on un-approved condominium projects take 60 days or more to close at least till the time HUD comes up with faster turn times or a more efficient process.

II. FHA Concentration Requirements

  • The FHA concentration (Percentage of units which has FHA loans in a project) requirement will be increased temporarily to 50 percent.
  • Exceptions to 50 percent Concentration Level - The FHA concentration may be increased up to 100 percent if the project meets all of the basic condominium standards plus some of the additional items.

III. Owner-Occupancy Requirements

  • At least 50 percent of the units in a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction, or projects still in their initial marketing period, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units.
  • Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned, may be excluded from the calculation of the required owner-occupancy percentage (should be removed from both the numerator and denominator).

IV. Pre-Sale Requirements

  • In the case of new construction, the pre-sale requirement will be reduced temporarily to 30 percent.

If you are a buyer or a seller in San Francisco Bay Area and would like to know if a certain project is approved or not, call me at 408.905.6261 or email me at Shashank@ArcusLending.com

Also read - FHA is changing guidelines for condominiums


Posted by


Shashank Shekhar

Mortgage Broker/Banker | San Jose, CA

(408) 615-0655 | Shashank@ArcusLending.com

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Comments (1)

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Jul 23, 2012 10:21 AM