Requirements for FHA Loans for Condos Tighten
Due to rules implemented in February 2010, condominium and townhome developments must have
FHA approval in order for an FHA loan (purchase or refi nance) to be possible, and spot approval
for individual units are no longer permitted. As of Jan. 1, 2011, those requirements just got tougher.
Condominium developments now must meet additional eligibility requirements at the time of
underwriting for an FHA loan, including:
>> No more than 25 percent of the property’s total fl oor area in a project can be
used for commercial purposes.
>> No more than 10 percent of the units may be owned by one investor. This applies
to developers/builders that subsequently rent vacant and unsold units.
>> No more than 15 percent of the total units can be in arrears (more than 30 days
past due) of their condominium association fee payments.
>> At least 50 percent of the total units must be sold prior to endorsement of the
mortgage in the case of construction.
>> At least 50 percent of the units must be owner-occupied or sold to owners who
intend to occupy the units. For proposed, under construction projects still in their
initial marketing phase, FHA will allow a minimum owner occupancy amount
equal to 50 percent of the number of presold units (the minimum presale requirements
of 50 percent still applies).
>> FHA will not insure more than 50 percent of a particular condo project. For
projects consisting of three or fewer units, FHA will insure one unit.
To assist members in navigating these new, more stringent requirements, C.A.R.’s
subsidiary Real Estate Business Services (REBS) has launched Clarus FHA Approval
™, powered by FHA Pros LLC. Clarus FHA Approval ™ offers condominium
certifi cation services at discounted prices to condominium associations that
work with a REALTOR®. Further details about this service may be found at
http://clarus.getfhaapproval.com/CLARUSFHA-Approval.pdf or call (818) 338-6588.
Clarus FHA Approval™ services also include a unique searchable database to
allow C.A.R. members to determine FHA loan eligibility status by individual property
address. This service will help members and their FHA clients avoid failed transactions
and non-recoverable costs due to undetermined FHA loan eligibility status.
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