The FHA eases condo loan requirements

Folllowing a meeting with the Mortgage Bankers Association held two weeks ago, the FHA will give lenders and borrowers more breathing room by easing its strict guidelines.

"We're coming in and saying we'll approve the projects and back them so you (the bankers) will feel confident and comfortable lending in this environment," said Margaret Meg Burns, Director of the FHA’s Single-Family Program Development.

While the new guidelines are provisional, they will be valid through the greater part of 2010, according to Meg Burns.

“This should really help some of the stalled projects if they can get their buildings approved…” “A lot of these buildings looking to sell out the rest of their inventory should be able to get FHA approval to close out the projects.” commented Grant Stern, a mortgage consultant who is understands well Fannie Mae and FHA guidelines.

Some of the guideline changes include:
- Borrowers can make down payments equal to 3.5% of the sale price versus the 20-50% some lenders have previously required.
- FHA will permit 50% absorption of FHA loans in a building- increasing from 30% to 50% the maximum percentage of units that can by financed with FHA insured loans. In some cases, it can even go up to 100% if the condominium complies with other requirements that are even stricter.
- Pre-sale requirement lowered-only 30% of new condominiums must be sold-out to obtain FHA loans approval versus 70% for conventional loans.
- At least 50% of units must be owner-resided or sold to owners who will occupy the units, bank controlled units are disqualified from the percentage computation.
- Spot loan approvals, which are done on non-FHA backed condominiums and are performed on a loan-to-loan basis, can carry through to Feb 1, 2010

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