Revised FHA Condominium Rules

It’s become harder and harder to find a condo that is eligible for FHA financing.  Just when everything seems okay, the buyer finds out the association doesn’t have enough reserves.  Or perhaps, the association has too many commercial units, like a shopping center on the first floor.  Or maybe, too may homeowners in the association have been hit hard and are no longer making assessment payments.  When these things happen, the unit becomes ineligible for FHA financing, sometimes dashing the buyer’s — and the seller’s — dreams of a purchase or sale.

The good news is, the FHA finally revised its rules for condominium financing, making it a little bit easier to get approved for an FHA loan.  For example:

1) If you are buying a residential unit in a condominium building where up to 50% of the space is allocated for commercial use, you can still qualify.  Previously, the cutoff was 25%.

2)  A single investor can now own up to 50% of the units in the condominium building, and other units will still be eligible for FHA financing.  Previously, if any one investor owned more than 10% of the units in a building, the other units could not qualify for FHA financing.

3)  You can still be eligible for an FHA loan if up to 15% of the units in the building are no more than 60 days delinquent on assessment payments.  This is an increase from 30 days. 

So if there was previously a condominium you had your heart set on, but it didn’t qualify for FHA financing, you may want to go back and see if you can get that loan now!