- March 29, 2010
Aimed at revitalizing a sagging housing market, recent Federal Housing Administration (FHA) regulations benefit condominium developers along with investors, lenders, owners and buyers.
FHA approval is essentially a guarantee of easier buyer qualification for loans on properties. The government’s backing makes lenders more willing to loan to borrowers who might not otherwise qualify for conventional mortgages.
With a bigger pool of potential buyers, developers have more opportunity to sell remaining units. For many developers, FHA approval is a marketing tool since it helps their condos stand out from other properties. However, due to the perceived high cost of approval, developers are not taking advantage of it.
The firm’s Joseph E. von Meier has significant experience in obtaining FHA approval for condominium developments. “In this market, every opportunity should be explored, and FHA approval is one where developers can reap important benefits,” von Meier explains.
Two important aspects of the 2010 regulations should be highlighted. Federal regulations no longer permit spot approval — loans granted on a unit-by-unit basis — and now require blanket approval for the entire development project for any transaction to be FHA approved. Secondly, the FHA can guarantee loans for up to 96.5 percent of the property value, which means buyers can purchase property with down payments as low as 3.5 percent of the property value.
Below is a list of the main requirements to qualify for FHA approval.
1. 50 percent of the total units in the project must be owner occupied (the 50 percent threshold is not required under the Temporary Guidelines in effect through 12/31/10).
2. 50 percent of the total units in the project must be presold (only 30 percent is required under the Temporary Guidelines in effect through 12/31/10).
3. No single investor may own more than 10 percent of the total units in the project.
4. No more than 30 percent of the total units can have FHA approved loans at any one time (this is increased to 50 percent under the under the Temporary Guidelines in effect through 12/31/10).
For more information about FHA approval, contact Joe von Meier at firstname.lastname@example.org or 312/840-7063.