The National Association of Realtors® sent out a press release last week commending the Department of Housing and Urban Development for finalizing new Federal Housing Administration condominium loan policies. The changes, many of which NAR has championed for over a decade, should yield thousands of new homeownership opportunities and help alleviate affordability restraints impacting markets across the country.
“We are thrilled that Secretary Carson has taken this much-needed step to put the American Dream within reach for thousands of additional families,” said NAR President John Smaby, a second-generation Realtor® and broker at Edina Realty in Edina, Minnesota. “It goes without saying that condominiums are often the most affordable option for first-time homebuyers, small families and those in urban areas. This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”
Specifically, the new guidance extends certifications from two years to three (each condominium building/project has to be approved/certified and in the past that certification was only good for two years). The new guidance also allows for single-unit mortgage approvals, provides more flexibility with owner/occupancy ratios, and increases the allowable number of FHA loans in a single project.
The rule will go into effect in mid-October and stands to make a difference in loan availability for buyers needing lower money down loans. In our resort town market, there are many affordable options in condos, but FHA loans were not usually an option. With more than 8.7 million condo units nationwide, only 17,792 FHA condo loans have been originated in the past year.
NAR Chief Economist Lawrence Yun recently noted that even though median prices for existing condos have risen slightly, their relative affordability means condominiums remain a natural answer to inventory shortages holding back home sales growth. “Condos are typically more affordable than a detached single-family home, but only a small fraction of condos are FHA-certified,” he said last month.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
