New 2010 FHA condo guidelines

Now with almost 85% of all mortgage loans  FHA. Condos are taking a hit with their values. there is an old saying. Condo prices rise after single family and townhouse prices but fall before single family and townhouse prices. Here are the new guidelines for condos. These changes have effectively killed the condo market.

FHA FACT SHEET / Announced Policy Changes

FHA’s mortgage insurance premium (MIP) will be increasing this year

The first step will be to raise the up-front MIP by 50 bps to 2.25% (effective April 5, 2010), and FHA is requesting legislative authority to increase the borrowers monthly MIP as well.

3.5% Down Payment to remain unchanged for qualified borrowers

FHA’s 3.5% down payment will remain unchanged for borrowers with credit scores greater than 620.  Where available, borrowers with credit scores below 580 will be required to put down at least 10%.

Reduce allowable seller concessions from 6% to 3%

FHA’s extraordinary concession limit will be reduced to 3% early this summer, bringing FHA into conformity with agency standards on seller concessions.

Revisions to FHA rules for Condominiums

Entire condo projects have to meet FHA approval.  ”Spot approvals” have been eliminated.

A maximum of 30 percent of the condo project’s units can have FHA-insured mortgages.

At least half of the condo project’s property owners will have to occupy their units.

All projects not deemed to be used primarily as residential real estate are out.

No more than 10 percent of the units may be owned by one investor.

No more than 15 percent of the total units can be in arrears (more than 30 days past due) of their condominium association fee payment.

Not more than 25 percent of the property’s total floor area can be used for commercial purposes.

At least 50 percent of the total units must be sold prior to endorsement of any mortgage on a unit.

At least 50 percent of the units of a project must be owner-occupied or sold to owners who intend to occupy the units. For proposed, under construction or projects still in their initial marketing phase, FHA will allow a minimum owner occupancy amount equal to 50 percent of the number of presold units.

Other “Interesting” Revisions

FHA insurance will be unavailable when properties are within 1,000 feet of a highway, freeway, or heavily traveled road; 3,000 feet of a railroad; one mile of an airport; or five miles of a military airfield.

There will be no more FHA loans if the “property has an unobstructed view, or is located within 2,000 feet, of any facility handling or storing explosive or fire-prone materials.”

FHA loans are out if the property is located within 3,000 feet of a dump, landfill, or super-fund site.

Projects in designated wetland and flood zones will not qualify for FHA insurance.