The 2008 crash was tough on real estate, but for condo owners, it was even more of a nightmare. For condo buyers to get an FHA loan on a condo, the entire condominium development had to qualify under strict rules. These rules had to do with the number of units that were owner-occupied, the type of insurance the condo HOA carried, the number of condos in foreclosure, etc. Not only were the rules themselves strict, but the approval process took a lot of time and effort for the HOA. Many condo developments were unable to meet FHA approval so anyone trying to sell a condo in an unapproved project was prevented from selling to a huge portion of potential buyers. Well, good news for condo owners- last week the FHA relaxed the rules for condo approval.
The three big changes include:
-Expanding the HOA insurance coverages.
-Revising the definition of Owner Occupancy- a huge deal for those condos that are used as second homes.
-Streamlining the condo development approval process
If you have a condo in a vacation area, or your condo is likely to appeal mostly to 1st time buyers or moderate-income buyers, these rules changes should make it easier for you to sell your condo. In addition, your HOA should be able to get FHA approval in a more timely manner, with fewer restrictions.
As an aside, one of the reasons Charlie Simms has been able to develop and sell so many townhouses in downtown Dayton, is that those developments are technically not condominiums, but rather Planned Unit Developments or PUDs. It’s a technical and legal distinction that changes how mortgages are approved and has meant that these units have always been eligible for FHA loans. Smart planning!
Currently, these FHA rule changes are only in effect for one year, so if you are an FHA buyer who is looking for a condo, move quickly to find your perfect space.