New Rules for FHA Condo Loans

The FHA has published some new rules for condo loans. These rules are more stringent and are designed to protect the agency from defaults and fraud.

The New Rules

1. 30% of the units must have already been sold
2. A big problem for Florida loans – no more than 15% of the units can be more than 30 days past due on the monthly condo association dues
3. A minimum of 50% of the condo units must be owner-occupied – this pretty much leaves condotels and condo conversion out
4. Residential square footage in the project must more than 75%. This means condos with lots of commercial space may not qualify
5. No single individual owner or investor can hold title to greater than 10% of the units in the project
6. The FHA will not insure more than 50% of the units in the project

You will have trouble with FHA condo loans if the developer is leasing units that haven’t sold. This falls under the 10% title holder rule from above. The developer is now considered to hold title as an investor since they are leasing the units.

Why Would You Want an FHA Loan for Condos

FHA loans are attractive for several reasons:

1. Low down payments – as low at 3.5%
2. Looser qualifying requirements – you don’t need perfect credit
3. Seller’s contributions – sellers can contribute to closing cost
4. Banks low them – they are guaranteed by the the US government

Daytona Beach Condos and the New Rules

I don’t think many Daytona Beach condos are going to qualify under the new rules. The problems with rule number 2 above, no more than 15% of the units can be more than 30 days past due on the monthly condo association dues is going to be a problem with many of the local condos. There are too many distressed units in those buildings. However, we can always check it out.

FHA loans are great for a home you plan to occupy and if you are interested in Daytona Beach homes and will be financing. you may want to check out FHA loans.