This is great news for many condo sellers and buyers. Thank you, Gene, for breaking down the changes and the reasons why this affects things for FHA condo buyers and sellers!
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?
- 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
- 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.
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 MundtMortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI License #216987American Portfolio Mortgage Corp.NMLS #175656Direct: 815.524.2280Cell: 708.921.6331
Mortgage Originator - NMLS #216987
IL Lic. #031.0006220 - WI License #216987
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.
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