Changes to FHA Condo Rules Will Make It Easier To Purchase Real Estate

The Federal Housing Administration published revised rules that could convince condo associations across the country to get certified or re-certified for financing, thereby opening individual unit owners and sellers to low down payment, FHA-insured mortgages once again. I know of a couple developments in Hudson that this would greatly help!

For condo boards, real estate agents and property managers, the long-awaited rule changes should prove to be "excellent news," that will "help spark home sales and help tens of thousands of condominium associations recover from the housing slump," according to the Community Associations Institute, the largest U.S. trade group in the field.

Among other changes, the rules eliminate some of the legal liability headaches that caused many condo boards to balk at FHA certifications; raise the permissible investor-ownership limit; and increase the percentage of non-residential, commercial use allowed in an FHA-certified project.

Among the key changes now in effect:

• The investor ownership limit in existing projects has been raised to 50 percent. Previously there was a 10 percent cap on the number of units owned by any single investment entity. Now the rule states that "any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units…if at least 50 percent of the total units in the project" are owned or under contract for purchase by owner-occupants.
• The percentage of space used for commercial/non-residential purposes in a project is limited to 25 percent, but applicants can request exceptions up to 35 percent and even above in certain mixed-use developments that are still "primarily residential" in character and where the project is "free of adverse conditions to the occupants of the individual condominium units."
• Condo associations in which as many as 15 percent of unit owners are 60 days delinquent on their condo fees will now be eligible for certification. Under the previous rules, no more than 15 percent could be 30 days late. This was a major issue for many associations since they didn't track 30-day delinquencies. Industry groups had sought a 90 day delinquency standard.
• Previous confusion over FHA requirements on fidelity bonds for management companies -- with coverage that sometimes duplicated what was already maintained by the condo association itself -- appears to be resolved. If the association's fidelity bond policy names the management company as an insured or agent, it should pass muster.

Feel free to contact me with further questions about the changes or other real estate related questions.

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Brian Webb is a proud Homes for Heroes affiliate for St. Croix Valley. He represents clients in Hudson, River Falls, Stillwater, Woodbury, Oakdale, Cottage Grove, and surrounding Twin Cities Areas! He assists with buying, selling, investing, and property management of your home! He offers free advice and consulting services, contact him at BuyInHudsonWI.com