FHA loans are great for first-time homebuyers because they have lower credit and down payment requirements.
However, the entire condominiums complex needs to be FHA-approved greatly restricting where borrowers could buy.
All that is going to change. Beginning October 15th condominiums no longer have to be approved to be eligible for an FHA loan.
In this article we’re going to go over the new rules on FHA approved condos.
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New FHA Rules on Condos
The new rule is a major victory for homebuyers looking to purchase a condo.
In the past, in order to use an FHA loan to buy a condo, that entire complex had to be approved by the Federal Housing Administration. The problem with this is that not many condos are actually FHA-approved. For instance, there are over 350,000 condominium complexes in the Country and less than 35% are FHA-approved.
Highlights of the New Condo Rules
- “Single-unit approval process” allows for a single unit to be eligible for an FHA loan even if the complex is not approved.
- Approved condominium projects will have recertification extended from 2 to 3 years.
- More mixed-use condo project swill be eligible for FHA insurance.
- Condominium projects with 10+ units, of which 10% are individual units can be FHA-insured; projects with less than 10 units may have no more than two FHA-insured units.
- Approved condo projects will require that at least 50% of the units are occupied.
Visit the HUD website to read about the new condo approval guidelines.
Will Increase Homeownership Immediately
By removing these restrictions we will see a spike in the number of FHA mortgage loans. The previous guidelines of every condo project needing to be FHA-approved really limited the number of loan options borrowers have throughout the Country.
Homeownership will rise for all Americans, first-time homebuyers, low-income families, seniors, and minorities will benefit the most.
Conventional loans often require at least a 640 credit score and a large downpayment, as much as 20% in some cases. However, FHA loans on the other hand require just a 3.5% credit score and a low 3.5% down payment. First-time homebuyers may qualify for assistance.
How to Get an FHA Loan
FHA loans have many advantages over conventional mortgages such as lower credit and down payment requirements. In fact, borrowers with a credit score as low as 500 may be approved with a 10% down payment. You also must be able to afford the payments, a debt-to-income ratio below 43% is ideal, but in some cases a higher DTI ratio can be approved.
FHA Loan Guidelines
- Mortgage insurance premium (MIP) required
- Two years of tax returns and W2’s
- Steady income with two years of employment
- Available for owner-occupied properties only
- Maximum 43% debt-to-income ratio