A new rule by the Federal Housing Administration that went into effect Oct. 15th is making it easier for first-time condo buyers, even those with less than perfect credit scores, to get approved for FHA-backed mortgages.
The new rule allows individual condominium units to be eligible for FHA mortgage insurance even if the condominium development has not been FHA approved. It introduces a single-unit approval process, which will make it much easier for many condominium residences throughout the country to become eligible for FHA-insured financing.
The rule changes also extend the recertification requirement for approved condominium communities from two to three years, and it allows more mixed-use projects to be eligible for FHA-insured mortgages. Condo developments will be eligible for FHA financing if their commercial/non-residential space does not exceed 35 percent of the total floor area (previously the maximum was 25 percent).
The FHA provides mortgage insurance on loans made by FHA-approved lenders, which benefit from the added protection against the risk of default. According to the U.S. Department of Housing and Urban Development, the rule change is expected to make 20,000 to 60,000 condo units per year eligible for the FHA-insured financing.