Last month, the U.S. Department of Housing and Urban Development sent out a letter explaining some changes to the FHA in regards to condos. Here are some of the highlights.
1.) FHA will permit spot loan approval until January 31, 2010.
2.) The number of allowable FHA loans in a particular building has been increased from what was going to be 30% to a higher limit of 50% with the possibility of 100% if it meets the following criteria:
- The building is 100% complete and construction has been completed for at least one year, as evidenced by issuance of the final or temporary/conditional certificate of occupancy for last unit conveyed;
- 100% of the units have been sold and no entity owns more than 10% of the units in the project;
- The project's budget provides for the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 10% of the budget;
- Control of Homeowners Association has transferred to the owners; and
- The owner occupancy ratio is at least 50%.
Note: New construction and conversions are not eligible for this exception.
3.) At least 50% of the units in a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction, or projects still in their initial marketing period, FHA will allow a minimum owner occupancy amount equal to 50% of the number of presold-units.
Vacant or tenant-occupied real estate owned (REOs), including properties that are bank owned may be excluded from the calculation of the required owner-occupancy percentage.
4.) Pre-sale requirements: In the case of new construction, the pre-sale requirement will be reduced temporarily to 30%. The pre-sale percentage must be documented as follows:
- Copies of the sales agreements and evidence that a mortgagee is willing to make the loan;
- Evidence that units have closed and are occupied; OR
- Information from a developer/builder that lists all of the units already sold, under contract, or closed that is accompanied by a signed certification from the developer.