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By G. Steven Bray
Currently, in order for a homebuyer to use an FHA loan to purchase a condo, the condominium project is subject to an approval process. The process is rather bureaucratic and takes time, AND it must be repeated every two years. Condo developers may muddle through the process to get units sold initially, but it seems few renew their approvals once the condo project is complete. If the project doesn’t have a current approval, a homebuyer may not use an FHA loan to purchase a unit in that project.
Many years ago, FHA would approve a single-unit in an otherwise illegible condo project – so called “spot approvals” – but FHA eliminated that option after the financial crisis.
I guess it’s a case of deja vu all over again because spot approvals are back. Apparently, the feds have realized that preventing FHA homebuyers from considering condos was exacerbating the housing inventory problem.
The new single-unit approval guidelines have a few limitations:
- the condo project can’t have ineligible characteristics, like a rental desk;
- the project must consist of at least 5 units;
- it must be occupied or have been issued a certificate of occupancy for at least one year; and
- no more than 10% of the units can have single-unit approvals.
The new guidelines go into effect on the 15th, so start shopping.