New FHA Rule Revises Condo Approval Process Policy Will Make It Easier for First-Time Buyers to Be Eligible for Mortgages

New FHA Rule Revises Condo Approval Process

First-time condo buyers will be getting a break from the government regarding mortgages.

The Associated Press reported Wednesday that the Federal Housing Administration has revised its current guidelines to make it convenient for those buyers to get mortgages.

Under the new FHA policy, which is scheduled to take effect on October 15 of this year, certain individual condo units would be “eligible for FHA mortgage insurance even if the condominium project is not FHA approved.”

In addition to making it convenient for individual condo units to qualify for FHA-insured funding, the new policy would extend the recertification process for condo projects from two to three years, as well as allow more mixed-use projects to be eligible for FHA insurance

To be eligible for single-unit approval, a condo unit has to be located in a completed project that is unapproved. If the condo project has 10 or more units, “no more than 10 percent of individual condo units can be FHA-insured; and projects with fewer than 10 units may have no more than two FHA-insured units.”

As reported by the AP, only 6.5 percent of 150,000 American condo developments previously qualified for FHA mortgages. Now the FHA estimates that 20,000 to 60,000 condo units could benefit under the new policy.

Today [August 14] we are making certain FHA responds to what the market is telling us,” said Acting Deputy Secretary and FHA Commissioner Brian Montgomery in a press statement. “This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium.”

David Chiu is an associate editor at The Cooperator. 

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