Looking to buy a condominium? You could be eligible for a government-backed loan by the FHA (Federal Housing Administration) with a lower down payment under new rules that were announced Wednesday.
The new regulation and policy guidance set a new condo approval process and allows for some individual condos to be eligible for an FHA mortgage even if the condo project isn’t FHA approved. The loans only require a 3.5% down payment and allow for lower credit scores than conventional loans according to The Wall Street Journal.
Officials said the new rules would make it easier for condo buyers to apply for FHA-insured financing and open up more mixed-use projects to FHA backing. “Today we are making certain FHA responds to what the market is telling us,” FHA Commissioner Brian Montgomery said. “This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium.”
The FHA stated that 84 percent of condo buyers it backs had never owned a home before getting their FHA loan. Housing and Urban Development Secretary Ben Carson said the change will open homeownership to new first-time buyers as well as seniors. “Condominiums have increasingly become a source of affordable, sustainable homeownership for many families and it’s critical that FHA be there to help them,” Carson said.
Only 6.5% of the 150,000 condo projects in the U.S. are currently approved for FHA’s mortgage insurance programs. Officials said the new policy, which will go into effect on Oct. 15, will open somewhere between 20,000 and 60,000 condo units to FHA-backed financing each year, which means more choices for home shoppers.
For an individual unit to be eligible for approval under the new rules, officials said it will have to be located in a completed project that is not approved. For projects with 10 or more units, no more than 10 percent can be FHA-insured. Projects with fewer than 10 units can have two FHA-insured units.
This is wonderful news for first time buyers that want to purchase a condo.
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