The Federal Housing Administration (FHA) announced on Wednesday new regulations and policies for the condominium approval process, aimed to help affordability for first-time buyers.
New rules and the new “Condominium Project Approval” section of the Single-Family Housing Policy Handbook provides a revision to the process.
“Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it's critical that FHA be there to help them,” said U.S. Housing and Urban Development (HUD) Secretary Ben Carson. “Today, we take an important step to open more doors to homeownership for younger, first-time American buyers as well as seniors hoping to age-in-place.”
The new policy will allow certain condo units to be eligible for FHA mortgage insurance, even if the total property is not FHA approved. This new policy goes into effect on October 15, 2019.
The FHA’s new condo policy is part of the objective to reduce barriers to affordable homeownership.
A few aspects of the new policy are:
- Introduces a new single-unit approval process to make it easier for individual condominium units to be eligible for FHA-insured financing;
- Extends the recertification requirement for approved condominium projects from two to three years;
- Allows more mixed-use projects to be eligible for FHA insurance.
“Today we are making certain FHA responds to what the market is telling us,” said HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery. “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.”
HUD states that 84% of the FHA-insured condo buyers have never owned a home before. There are more than 150,000 condo projects in the nation and only 6.5% are approved to participate in the FHA’s mortgage insurance programs.
An estimated 20,000 to 60,000 condo units could become eligible for FHA-insured financing annually.