CONDOs Be Afraid, Be Very Afraid
October 10th 2009 10:58 am
OK Maybe I am being a little dramatic but the new rules on FHA condo appraisals are going in to affect on November 1 and it may cause you some trouble if you don’t understand how they affect your purchase. If you are trying to buy a condo with an FHA loan, you need to be aware of the rule changes that will affect how condos are approved for FHA Financing. Here is a quick rundown of the specifics:
1) Condo projects approvals will have to be renewed every 2 years.
2) Condos projects that were approved after January 1, 2008 will be OK until December 31, 2010.
3) ALL other condo projects will have to go through the approval process before an FHA loan can be used.
4) Projects will have to have updated insurance for hazard and liability.
5) No more then 25% of the total floor area can be used for commercial purposes.
6) No more the 10% can be owned by one investor.
7) At least 50% of the units need to be owner occupied.
8)There will be no more “spot approvals”. Either all of the units get approved or none of them do.
When this rule was introduced in July, HUD/FHA was trying to make lenders pay for the approvals as well as be responsible for getting them done. Lenders have pushed back saying that they will not do that. So the rules are in place but no one knows who or how they will get done after November 1st.
If you are currently thinking of buying a condo, make sure that the project has been approved since Jan 1, 2008. (To see if a particular condo project is approved contact your lender to have them check FHA Connection, or contact me and I will be happy to help.) If not then until it is determined how these out-of-date projects can be re-approved, you may want to look in a different direction.
I will send more info as it becomes available.
Also please visit a new blog site at www.insiderealestatenews.com This is a site that is edited by John Rebchook formerly of the Rocky Mountain News and has contributions from such notable as Oliver Frascona. This site is sponsored by Universal Lending Corp.