Could spot condo approval return for FHA?

 Owner-occupied, Regulations, Residential Mortgage  Comments Off on Could spot condo approval return for FHA?
Oct 242016

For more information, please contact me at (512) 261-1542 or

By G. Steven Bray

We talked a couple weeks ago about the changes FHA adopted to make it easier to get FHA financing for condos. Unfortunately, the changes are temporary, but FHA is trying to rectify that by proposing new regulations that take these changes a step further and make them permanent.

The biggest news is FHA is proposing the reinstate spot approvals for condos. Typically, a condo project must be FHA-certified for its units to be eligible for FHA financing. A spot approval allows a lender to seek approval for a single unit in an otherwise uncertified project.

Another proposed change that’s receiving mixed reviews would establish a range within which FHA could set the minimum percentage of units that must be owner-occupied. Currently, the minimum is 50%. The proposed range is 25% to 75%. FHA says this would give it flexibility to respond to market conditions. Congress has suggested 35% is appropriate, and the housing industry would prefer the certainty of the fixed, lower number.

FHA also is proposing to establish a range for the maximum commercial space within a mixed-use development. The current maximum is 50%. The proposed range is 25% to 60%.

You can find the proposed rule on HUD’s Web site,, and FHA invites your comments.

FHA makes it easier to get a condo loan

 Loan Guidelines, Owner-occupied, Residential Mortgage  Comments Off on FHA makes it easier to get a condo loan
Oct 032016

For more information, please contact me at (512) 261-1542 or

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.