DEJA VU! We first discussed the proposed FHA changes way back in June 2016, but the Federal Housing Administration did not finalize the rule changes until August 2019. The new rules will make a FHA mortgage loan available to many more condominiums.
An increase in FHA condominium financing benefits EVERYONE who owns a condo whether or not they have a FHA mortgage, because more buyers will be able to afford condominium properties and values will increase. A FHA mortgage is more affordable because less cash is needed upfront and less income is required to qualify than most other mortgage programs.
FHA unfortunately tightened their condo rules after the 2008 housing crash, and total FHA condo loans fell from a high of 90,000, to just 17,792 in the past year. The FHA reversal will greatly help the owners of condominiums in DC.
FHA mortgage rules affect condos in two ways, 1) building/community approval for the whole condominium, and 2) loans for individual units. Before these changes, many DC condo “buildings” were not eligible for FHA approval. Without building approval, a buyer/homeowner could not get a FHA loan on an individual unit no matter how strong their personal finances. The new rules make single-unit approvals possible (without building approval) – a huge change. In addition, the changes make the process of building approval quicker and easier with fewer steps, longer renewals, and more flexibility on both a) the number of rentals in the building, and b) the total number of FHA loans, which doomed many buildings in the past.
In addition, “reverse mortgages” for seniors are approved through the FHA and the new rules will provide owners that are seniors with more financial flexibility. With a reverse mortgage seniors can keep their condo while still accessing some of its equity. They are able to refinance an existing mortgage and/or pull cash out while ending mortgage payments while they occupy the home.