FHA Changes to Condo Guidelines ... Why They Matter

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Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
https://activerain.com/droplet/5kth

 

 

FHA Changes to Condo Guidelines ...

Why They Matter

 

FHA (Federal Housing Administration) has announced that it is issuing new guidelines for Condominiums and Condominiums projects.  The new guidelines will take effect as of October 15, 2019.

 

While the new rules extend the time period for FHA Certifications on condominium developments from 2 to 3 years (a long-awaited and very welcomed change) and make more mixed-use approvals possible, for me the most exciting portion of this announcement centers on single Condo units. 

 

In a nutshell, these changes should make it easier for individual Condo units to qualify for FHA-backed mortgage financing.  That's an important and exciting change.

 

Starting on October 15, 2019, the FHA guidelines will read: 

  • An individual Condo unit located in a building of 10 units or more ... may be eligible for spot approval if no more than 10% of the units are FHA-insured 
  • For Condo units in buildings with fewer than 10 units ... no more than two units can have FHA insurance


Why is this important?  And to whom will it make a difference?

For Buyers:  

  • These revisions will enable FHA insurance of individual Condo units, even if the condominium project as a whole does not have FHA approval   
  • These revisions provide additional flexibility in ratios ... specifically the ratio of Investors to Owner-Occupants ... allowing for FHA financing in a Condo building  


For Sellers:

  • This revision could be huge.  It could be the "shot in the arm" that Condo owners/sellers in Chicago and the Chicagoland area have needed to facilitate sales  


For the Chicago - Chicagoland Housing Market:

  • Condos represent a sizeable portion of the housing market in the City and surrounding area.  These changes will remove some barriers presently found in the housing market and make the transacting of Condos easier for buyers and sellers alike  


For homebuyers interested in entering the housing market for the first time ... and for those seeking to downsize ... Condos are an affordable stepping-stone.  FHA has contributed to this portion of the market immensely. 

Again, why?

 

 

FHA has helped make housing more affordable and "financeable". 

 

It allows for lower down payments to be made by borrowers when home buying.  (Note:  Many borrowers choose to utilize the flexibility of an FHA loan even when they could place a larger down payment on a property.)


Here are some examples as to how the utilization of FHA financing can prove beneficial to Borrowers:

  • Down Payment:  The minimum down payment for an FHA Loan is 3.5%
  • Credit Scores:  FHA allows for Credit Scores well below Conventional Loan requirements, and at affordable rates
  • Type of Down Payment:  FHA allows Borrowers to receive Gift Funds from family members (and others, in some cases
  • Co-Signing Borrowers:  With an FHA Loan, Non-occupying Borrowers (typically relatives) can be introduced as Borrowers to assist in Income or Credit support for the Primary Borrower
  • Employment History:  FHA is the most forgiving loan product regarding job tenure, job stability, length of employment, how income is received, and more
  • Credit Histories:  FHA allows minimal, fair, and sometimes "no-credit" Borrowers to qualify (pending other factors
  • Interest Rates:  FHA Loans typically run about 1/4 to 1/2 lower than Conventional Loan rates, when Credit Scores are equal
  • Major Credit Events:  FHA allows Borrowers to rebound more quickly (shorter waiting periods) after Bankruptcies, Short Sales, or Foreclosures than most all other types of financing


While it is true that Mortgage Insurance is generally required with FHA Loans, the monthly payment associated with these loans can be considered a small price to pay when use of an FHA Loan (previously unattainable) paves the way to homeownership.  Plus it must be mentioned that Mortgage Insurance Costs can be reduced with larger down payments and shorter loan terms ... or dropped/addressed in the future.  (Contact me for clarification or further info on this point

 

For anyone hoping to enter the housing market for the first time (or downsizing), it's important to get the facts regarding their personal financing options.  That is especially true if home buying plans possibly include the purchase of a Condominium or Townhome.  

 

Quite simply, these new FHA guidelines may have enhanced and broadened the housing to be considered during a home search ... 

 

Knowledge and level of experience of real estate and lending professional become even more important during these types of transactions and after rules or regulations changes.  Bottom line, make sure to do your homework prior to making your choice.  The likelihood of your financing and home buying process ending successfully rests upon it.

 

 

 

Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicago - Chicagoland - IL/WI? 


Contact me today! I'll put my 40 years of mortgage experience and expertise to work on your behalf. 
I'm easily found at: 

 

Gene Mundt
 
Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI License #216987
 
American Portfolio Mortgage Corp.
 
NMLS #175656
 
 
Direct:  815.524.2280
Cell:  708.921.6331
eFax:  815.524.2281

 

 

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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

Your Referrals & Testimonials are Always Greatly Appreciated! 

 

 

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Marney Kirk 08/22/2019 12:08 PM
Topic:
Lending / Financial
Location:
Illinois Will County Joliet
Groups:
Realtors®
Mortgages
Chicago Area Real Estate BUZZ!
1st Time Buyers
Bananatude
Tags:
fha
mortgage insurance
mortgage advice
fha condo financing
fha spot approvals
fha condo approval process
fha changes to guidelines

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Rainmaker
388,885
Marney Kirk
Cummings & Co. Realtors - Towson, MD
Towson, Maryland Real Estate

Hi Gene, I was very happy to hear about these changes - and your post hits the great reasons why!

Aug 22, 2019 12:07 PM #7
Rainmaker
3,094,617
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Hi Gene... I read about these changes a few weeks back... personally, I believe they are good news for most condo owners in making it easier to sell their units. We are not a huge condo market (more townhomes), but the FHA rules have in the past really held back condo sales in developments where you can pretty well expect the buyer to be an FHA borrower.

Aug 22, 2019 12:36 PM #8
Rainmaker
1,164,579
Jane Peters
Home Jane Realty - Los Angeles, CA
Los Angeles real estate concierge services

Unfortunately, FHA borrowers don't go down well in our higher-end markets but it certainly does open up the possibilities for those whose only option is the FHA route. "Borrowing".

Aug 22, 2019 01:41 PM #9
Rainmaker
3,814,962
Dorie Dillard CRS GRI ABR
Coldwell Banker United Realtors® ~ 512.750.6899 - Austin, TX
Serving Buyers & Sellers in NW Austin Real Estate

Good evening Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi ,

I've been hearing about the changes which I'm sure will please many condo sellers and buyers. I typically do not handle FHA but there are some in our office who do and they are exited with the new guidelines.

Aug 22, 2019 03:09 PM #10
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Frank Rubi
Frank Rubi Real Estate, LLC - Metairie, LA
FrankRubiRealEstate.com

Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi great news and information pack on condo marketing. 

 

Aug 22, 2019 04:38 PM #11
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3,872,124
Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Gene- important information for sellers and buyers as well as agents working with them!!!

Aug 22, 2019 06:49 PM #12
Rainmaker
2,762,753
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

We will always have to adapt when inevitably thiny like this happens. Great blog! lol

Aug 22, 2019 08:13 PM #13
Rainmaker
2,762,753
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Kathy Streib Very ivitally so! Things will change and we will move with changes if we’re smart, right? :)

Aug 22, 2019 08:16 PM #14
Rainer
520,377
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH
CRS

New FHA Condo rules!!! Thanks NAR for pushing these through these changes! These changes should make it easier for individual Condo units to qualify for FHA-backed mortgage financing.  That's an important and exciting change.

Aug 23, 2019 04:03 AM #15
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Hi Gene:

Thanks for weighing in and sharing the great news for buyers and sellers who may be able to take advantage of FHA loans with the new guidelines!

Jeff

Aug 23, 2019 07:52 AM #16
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Fantastic News GENE thanks for the Heads Up on this information Glad to hear lending on Condos is losing up for FHA once more 

Aug 23, 2019 10:32 AM #17
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Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

Gene, thanks for making the new ruling understandable for us less than smart "rainers".

Aug 23, 2019 12:51 PM #18
Rainer
477,314
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

Long overdue change and IMO condo development will rise considerably because of sfr construction costs and economic factors as our economy evolves. Attractive locations are getting scarce and bundling properties to erect condos are rising exponentially in our area. 

Aug 23, 2019 07:07 PM #19
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Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

That is huge news, Gene. Thanks for letting us know. While we don't really sell condos these days, in the past, the lack of FHA approval for a complex certainly narrowed the pool of buyers. This should be a shot in the arm for condo sellers. 

Aug 24, 2019 06:49 AM #20
Rainmaker
493,216
Terry McCarley
REMAX Realty Team - Cape Coral FL - Cape Coral, FL
REALTOR, SRES, CDPE - Cape Coral, FL

Thanks for sharing this information- sounds like great news for condo buyers and sellers

Aug 24, 2019 07:23 AM #21
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Gene the return of spot approvals is HUGE, and hopefully they will increase the allowable percentage in the future.

Aug 24, 2019 04:46 PM #22
Rainmaker
152,026
Eva B. Liland with Century 21 Doug Anderson
Century 21 Doug Anderson - Lancaster, CA
Glad to be of Service

Love, love, love the new FHA guidelines for both condo buyers and sellers. As someone said, it will be a welcomed shot in the arm.

Aug 25, 2019 06:46 AM #23
Rainmaker
232,179
Dale Taylor
Re/Max 10 New Lenox Illinois - Frankfort, IL
Realtor = Chicago Illinois Homes Townhomes Condos

There is still one big hurdle for Buyers financing FHA to overcome.

HOA Boards prefer Buyers financing conventional because they tend to come to the complex with “more skin in the game!”

Meaning, they tend to invest a larger down payment, starting off with more equity than Buyers financing FHA.

There is a belief, Buyers possessing more equity tend to fight off allowing their unit to go into foreclosure when they encounter a dry financial season in life.

Condo Owners just feel there is more stability when units are purchased with conventional financing.

Fasten your seatbelts. What I am about to share will raise eyebrows, but it is a reality that has potential discrimination written all over it!

As a result, the Seller and Buyer way need to team to present the Buyer as well qualified to get cooperation from the HOA for approval of Buyer.

I have known HOA Board Leadership to just not do the needed paperwork when they do not like the Buyer or type of financing.

They will just wait out the Buyer getting inpatient and moving on.

I have lived this bad behavior.

After my Seller lost a good qualified Buyer for this very reason, I had to sit down with her to have a heart to heart talk about her figuring a way to ethically take control of directly responding to Lender paperwork required to procuring financing for the Buyer.

You can bet, the next Buyer purchased the unit.

Aug 25, 2019 08:06 PM #24
Rainmaker
2,762,753
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

I’m just going back over these in again telling you how well you did with this! Excellent job all around! :)

Sep 03, 2019 10:05 PM #25
Rainmaker
2,762,753
Laura Cerrano
Feng Shui Manhattan Long Island - Locust Valley, NY
Certified Feng Shui Expert, Speaker & Researcher

Skin in the game does help for a lot of conventional wisdom types but a lot of things are moving forward and progressing and this might be the result maybe. Dale Taylor I think you did an awesome assessment here, Dale! :)

Sep 03, 2019 10:08 PM #26
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