It’s been bantered around for years, finally the Federal Housing Administration announced long awaited changes to the guidelines to approving condominiums for FHA loans. This will help in several areas.
FHA loans allow for low down payments, and easier borrower qualifying guidelines than conventional mortgages. Some potential home buyers are priced out of the expensive single family dwelling market, but using the FHA loan they can afford a condo/townhouse.
The challenge has been there are very few FHA “approved” complexes. Twenty years ago there used to be a lot. Recently there are very few in the Los Angeles area.
To be FHA approved the HOA management has to complete an application, submit accounting, reserve and budget information, meet owner occupancy ratios, and the complex has to meet some basic maintenance criteria. Even if the complex would meet the approval criteria, many HOAs haven’t wanted to submit all the documentation and fees every two years to stay on the approval list. In several ways not being approved hurts the complex, as it eliminates a potential buyer base that would support prices, but having FHA approval gives existing owners refinancing options, and a big one… FHA approval would allow seniors the ability to get Reverse Mortgage (HECM) financing, giving them the ability to defer mortgage payments, stay in their units, and give financial flexibility.
Under the revised guidelines – which take effect Oct. 15, 2019 – even if a complex is not FHA approved, an individual condo unit 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 units in buildings with fewer than 10 units, no more than two units can have FHA insurance. This is valuable, as FHA did away with the “Spot Approval” process years ago.
The agency also loosened restrictions on owner-occupancy rules, stating that eligible condo projects can now be just 50% owner-occupied. It extended the recertification deadline for approved condo projects from two to three years.
Finally, the agency said the new rules will allow financing for more mixed-use projects, stating that approved projects can now have up to 35% of their square footage dedicated to non-residential use.
The revised rule will drastically enhance a condo complex approval capabilities, and owner’s access to HECM financing.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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