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Condo Purchases For First Time Home Buyers
The federal government is expanding the scope of condominium purchases eligible for lower-down-payment loans.
The FHA- Federal Housing Administration - could help revive the entry-level condo market for first-time buyers because FHA-backed loans require only a 3.5% down payment and lower credit score than conventional loans.
It also loosens financial-crisis-era rules and could expose the government to a higher likelihood of loan default if the housing market continues to slow and prices fall.
The FHA insured a million home loans last year made by banks and other private lenders, the vast majority of which were for single-family homes. With the new rules, the agency estimates it could insure as many as 60,000 additional condo loans each year, on top of the 16,000 condo loans it backed in 2018.
Condos are a more affordable alternative for first-time buyers in our area of Florida where single-family homes are increasingly out of reach for many. The median price of an existing condo or co-op unit was just over $260,000 in June, compared with nearly $290,000 for the median existing single-family home.
Beginning in 2008, the FHA tightened its lending standards for condos, including eliminating spot approvals. Condo lending became a niche part of its business: Only 6.5% of the 150,000 condo projects in the U.S. are FHA-certified.
Now, the FHA will once again approve loans for individual units in buildings that aren’t certified. FHA Commissioner Brian Montgomery said the agency has tightened requirements to avoid the abuses of the last housing boom. Individual loans will be approved in most buildings only if no more than 10% of the loans are to FHA borrowers.
The changes have been in the works since 2016 but hit a pause during the switch in presidential administrations before agency officials revisited the policy details.
The new rules won’t help the struggling luxury-condo markets in Miami or New York. FHA loans are targeted at moderate-income borrowers and are capped at around $350,000 in Miami and around $730,000 in the New York area.
Kimberly Maxwell, a fourth generation in Walton County, knows the community and its wonderful lifestyle firsthand. Although she was born in NYC, moved to NC in her high school and college years, her m....