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FHA Condo Approval

April 14th, 2022 3:08 PM by Sam Kader MLO130505

October 15th 2019 is the start date for the new FHA rules that allow FHA loan approval for mortgages to buy condo units in projects that are not currently on the FHA Approved list. The new rules are:

For single-unit mortgage approvals , individual condominium unit applying must be located in a completed project that is not FHA-approved.
Projects must not be new construction and must have at least 5 units.
FHA certification will extend from two to three years.
Owner occupied is lowered from 75% to 50%. Secondary residences can be included in this percentage as long as the owner does not rent out the unit while they are not occupying the home.
Projects with 35% owner occupied will be evaluated based on project's financial and operational stability.
Projects with less than 20 units - provide documentation from the Condo HOA to confirm that no more than 1 unit can be owned by the same individual or related party.
Projects with more than 20 units - provide documentation from the Condo HOA to confirm that a single entity may not have more than 10% of FHA-insured units.
Projects with less than 10 units - no more than 2 units may be financed with an FHA mortgage.
Projects with more than 10 units - no more than 10% of the units may be financed with FHA mortgage.
HOA may not have more than 15% of the total units in arrears/past due.
FHA will increase insured units from 50% to 75% in a condo project.
Commercial space cannot exceed 35% of the project's total floor area.
Standard HOI requirements will be followed based on the property type.
FHA minimum down payment required is 10% (instead of 3.5%).

Who will likely benefit from these new rules? Potential borrowers with FICO score of less than 600 as well as condo owners living in non-FHA approved projects.

Below is a single unit approval checklist that lenders will be reviewing.

Posted in:FHA Underwriting, Underwriting GuidelinesPosted in:Condo and tagged: FHA Underwriting Underwriting Guidelines Condo

Posted by Sam Kader MLO130505 on April 14th, 2022 3:08 PM

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