The US Department of Housing and Urban Development (HUD) released a new Mortgagee Letter 2009-19 last week, detailing new changes in the condominium approval process.  While the new guidelines abandon the one-year waiting period before considering loan applications on condo units, they have added new restrictions. The big thing to remember when looking at condos is that either the unit itself or the entire building has to be FHA approved

• Units in condo hotels, time shares, houseboat developments, and projects where there are multiple dwellings inside single condominium units are all prohibited
• FHA won’t insure units in condominiums where more than 25% of the total space is allotted to commercial uses, it will reject applications from any property that it deems not “to be primarily residential” in character.
• No loans if more than 10% of the units are owned by investors.
• FHA won’t approve loans where less than 50 % of the total units already have been sold, or where less than 50 % of the units are owner-occupied
• If more than 30% of the unit owners in a project took out FHA-backed loans, the agency doesn’t want to do any more business in that condominium.
• FHA won’t insure units in buildings located within a thousand feet of a major highway, three thousand feet of a dump, landfill or EPA Superfund site.

This Week’s Real Estate Insight

Buyers looking at Condos might not be aware that the unit they are looking at is not available  for FHA financing,  if you are considering FHA financing on a Condominium, check  out https://entp.hud.gov/idapp/html/condlook.cfm to see if the unit is even eligible before  you get your hopes up on a particular unit.