Posted on: 24th Oct, 2009 02:14 am
The new FHA condo rules which were supposed to be implemented from October 1st, has now been delayed until November 2nd. Some of the major requirements that would come into effect if the new rules are implemented would include:
- As per the new rule, around half of the condo project's property owners will have to occupy their units.
- Maximum 30% of the units can have FHA-insured mortgages.
- The entire condominium project should have FHA approval before a borrower is given an FHA-insured loan.
- At least half the condo units must have already been sold before the FHA insures a mortgage on the condo.
Hi Sara,
There's no doubt the new rules when imposed will have a negative impact on the condominium market. The new rules require up to half the units in a project to be sold before FHA can back a loan. Half the units in a project must be owner-occupied. Moreover, the entire project now has to be approved by FHA before a borrower can get an FHA-insured loan. With most of the units in the market being vacant, this leaves the buyers with few choices. Those willing to purchase condominium units will not be able to get FHA-backed mortgages just because other people did not purchase with FHA loans!
It is true that conventional mortgage lenders want as much as 70% of the units to be sold before they back a loan and the FHA requirement of 50% is lower as compared to that. But one should also keep in mind the current market scenario, where almost 1/3 of the homebuyers are taking FHA loans due to low down payment requirement. Implementation of stringent rules will reduce the demand for new mortgages, leaving more of the condominium units in the market vacant.
There's no doubt the new rules when imposed will have a negative impact on the condominium market. The new rules require up to half the units in a project to be sold before FHA can back a loan. Half the units in a project must be owner-occupied. Moreover, the entire project now has to be approved by FHA before a borrower can get an FHA-insured loan. With most of the units in the market being vacant, this leaves the buyers with few choices. Those willing to purchase condominium units will not be able to get FHA-backed mortgages just because other people did not purchase with FHA loans!
It is true that conventional mortgage lenders want as much as 70% of the units to be sold before they back a loan and the FHA requirement of 50% is lower as compared to that. But one should also keep in mind the current market scenario, where almost 1/3 of the homebuyers are taking FHA loans due to low down payment requirement. Implementation of stringent rules will reduce the demand for new mortgages, leaving more of the condominium units in the market vacant.
"around half of the condo project's property owners will have to occupy their units."
This will surely lower the rate of new investors in condos which are not occupying the houses and buying the property just for the purpose of investment.
Again this is good move for regulating the mortgage market and for minimising the deficit between luxury and affordable homes.
Thanks sara for shedding a light on the subject matter.
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This will surely lower the rate of new investors in condos which are not occupying the houses and buying the property just for the purpose of investment.
Again this is good move for regulating the mortgage market and for minimising the deficit between luxury and affordable homes.
Thanks sara for shedding a light on the subject matter.
:arrow: :arrow: :arrow: