Federal rules set to take effect in two weeks are expected to make it much tougher to buy and sell a condominium. The rules which reduce the number of condo‘s that qualify for Federal Housing Administration loans, will push down the already depressed condo sales.
The rules prohibit more than 30 percent of units in any condominium community from receiving FHA-insured loans. Most of the condo units have more than 30 percent, especially units that are new that are aimed at first-time buyers. FHA allows smaller down payment an lower credit scores than conventional loans, have become more popular in the past two years as subprime lenders dwindled and conventional lenders tighten their guidelines.
FHA loans are expected to account for 30 percent of all mortgages in 2013, but they make up a much higher percentage of smaller loans, ones typically taken out by younger, first-time buyers.
The entire condominium communities must be FHA-approved before any loan can be approved..in the past the guidelines allowed individual loans to be approved despite the status of the condo community. At least half the units in a development must be sold before the FHA will back a loan in that community, potentially putting a crimp in condo development.
Lots more coming down the road on this new development!