With All the Doom and Gloom Surrounding The Economy, There’s a Bright Spot for First Time Buyers As New FHA Rules Make Condos Easier to Finance
Condominium purchases are about to get easier for buyers with FHA mortgages, according to the Federal Housing Administration. New FHA underwriting guidelines are slated to take effect October 15, but there is plenty of buzz already.
“It’s a potential game-changer for Chicago’s first-time home buyers,” says Ryan Gable, founder and president of StartingPoint Realty. “The new FHA mortgage rules cut much of the red tape out of condo financing. In turn, this is going to open up the inventory buyers can choose from.”
The most significant FHA rule change concerns the “spot approval” of individual condo units. In the past, the entire building had to be qualified before any unit within it could be eligible for FHA financing. Obtaining this building-wide approval was a cumbersome, time-consuming process, one that most associations didn’t care to bother with.
“Less than two percent of the condo buildings in Chicago’s Roscoe Village were FHA-approved,” explains Gable. “This was a huge problem, because most first-time buyers were looking at condominiums, and those that wanted to use FHA financing were left in the dark. Since the buildings themselves weren’t eligible, these buyers were shut out. Their only option was to wait until they could qualify for another type of financing.”
With the new “spot approval,” an individual condo unit can qualify for an FHA mortgage regardless of the FHA status of the rest of the building. Also improved is the requirement for owner-occupancy ratios, which now allow up to 50 percent of the units in a building to be renter-occupied. Condo units in mixed-use developments will also be eligible for FHA financing, as long as the non-residential areas do not exceed 35 percent of the total square footage.
The rule changes are intended to improve home ownership opportunities, especially for first-time buyers. Yet FHA mortgages remain complicated where condos are concerned, and the new rule changes won’t eliminate every hurdle.
“The new FHA rules are welcome,” says Gable. “But they are not a magic wand. First-time home buyers should keep their financing options open, and compare mortgage offers to find the right solution for their needs. With lower rates and this new change, we’re excited for potential first-time home buyers.”
Since 2004, StartingPoint Realty has specialized in educating first-time home buyers throughout Chicago and the Northwest Suburbs. StartingPoint Realty offers free, first-time home buyer seminars at various locations in Chicagoland. For more information, call 847-348-1154 or visit www.startingpointrealty.com.