Changes are coming to FHA lending standards that will significantly affect condo financing. Originally set to go into effect on October 1st, the changes have been moved out to December 7, 2009. As if buying a condo is not tough enough, the changes include:
- Elimination of “spot approvals” which allowed a lender to qualify a single unit for financing; now the entire condominium project will have to meet FHA approval standards before a borrower can get an FHA-insured mortgage
- 30% of the units maximum will be allowed to have FHA-insured mortgages
- 50% of the units in a new complex will need to be sold before FHA will insure a mortgage on a condo unit
- 50% of the units in a project must be owner occupied
Very few condo complexes around the Tempe area meet all of the requirements. Particularly tough to find are complexes that meet the owner occupancy ratio. Many condo sellers give up and usually rent their unit which adds to the problem. I’ve had to break the bad news to some of my clients that their FHA financing fell through due to too many renter occupied units. Conventional loans also typically have tough condo standards. Of course, cash is always the sure way to go if you can afford it.
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