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Qualification for FHA Availibility

The Federal Housing Administration has once again changed its requirements for qualification of a condominium for FHA-insured loans.  For any condominium to be approved, it must be in full compliance with State law.  The project must be residential and cannot be a condo-hotel, a timeshare or a houseboat project.

1.  For new construction, at least 30% of the total units in the condominium must be sold prior to the endorsement of a mortgage on any Unit.  After December 31, 2010, the presale requirement increased to 50%, however this is a reduced presale requirement in new construction, compared with 70% for loans from conventional lenders.

2.  At least 50% of the units must be owner occupied or sold to owners who intend to occupy the unit.  In a proposed project, projects in construction or projects in initial marketing phase, the FHA is allowing a minimum owner occupancy of 50% of the presold units.  Through December 31, 2010, bank-owned units may be disqualified from the percentage calculations.

3.  Any project must have at least two units.

4.  The condominium must be covered by hazard and liability insurance.  Where applicable, flood and fidelity insurance will also be required.

5.  No more than 25% of the total floor area can be used for a commercial purpose.  Any commercial portion must be favorable to residential living.

6.  No more than 10% of the Units can be owned by one investor.  This also applies to vacant or unsold Units owned by the builder of developer that are subsequently rented out.  If there are 10 units or less in the condominium, no single entity may own more than one unit and still qualify.

7.  No more than 15% of the total units can be more than 30 days past due in the condominium association maintenance fee payments.

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