President of the National Association of Realtors, Chris Polychron, testified on Capitol Hill last week to voice his support for the House of Representatives bill called the “Housing Opportunities Through Modernization Act of 2015.” This bill, if passed, will relax some of the Federal Housing Administration’s policies concerning condominiums. Specifically, the requirements for condominium developments that want to be FHA certified.
But let’s back up for a moment. What are the current requirements for a condo community that wants to be FHA certified, and why would they want that certification in the first place? The list of eligibility guidelines for FHA certification includes a requirement that at least half the units be sold, and at least half of the units must be owner occupied. Once a condo development has met these and other eligibility requirements, the certification is good for two years, and then they must repeat the process all over again.
According to the FHA Review, there are many benefits and virtually no downsides to gaining FHA approval. For example, potential buyers who want to finance through an FHA loan can only consider FHA approved condos, and many buyers shopping for condo are going to be attracted to the low down payment and less prohibitive approval process of an FHA mortgage, so the pool of potential buyers opens up considerably with FHA certification. Attracting more buyers with FHA mortgage loans also means attracting more owner occupants — those buyers who can finance a condo through more traditional means with 20% down are more likely to be investors who plan to rent the unit.
With all these benefits, why then is the president of the NAR testifying in support of revisions to the FHA certification process? The current process, which has to be repeated every two years, is considered to be costly and “burdensome,” in the language of the House bill, so there are still plenty of communities who opt not to go through with it. Relaxing the restrictions on condos and streamlining the process for certification will open up housing opportunities for first-time homebuyers, singles and those looking to buy in urban areas, or at least, that’s the hope.
For information on FHA mortgage loans, or to speak with an expert, visit lonestarfinancing.com.