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By G. Steven Bray
The FHA loan program once was a major source of financing for condo purchases, but due to regulatory changes, its volume dropped by almost 75%. The changes disqualified thousands of condo projects, and in turn limited the housing choices for first-time homebuyers and others with limited credit, a target market for the FHA program, and limited the pool of potential buyers for condo owners in those disqualified projects.
Well, it seems FHA may have seen the light. New rules FHA adopted this summer loosen up some of the more onerous restrictions. The two biggest changes affecting TX condos are:
– FHA agreed to include second homes that are not rentals in its calculation for owner-occupied units. A condo project qualifies for FHA financing only if at least 50% of the units are owner-occupied. This change could make a huge difference for projects in vacation areas.
– FHA also has simplified the recertification process that condos must go through every two years to remain approved. Some condo associations allowed their FHA approvals to lapse because the old process was so burdensome. Lenders often pursued the recertification process for the project because of a buyer’s interest in a condo, but imagine the number of potential buyers who didn’t apply because the project wasn’t already approved.
The new rules are only good for a year, but that gives FHA time to listen to feedback and enact permanent rules that don’t unfairly restrict lending for condos.