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FHA Announces Latest Owner Occupancy Requirements for Condo Financing Approval
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On October 26, 2016, as a result of the FHA condo financing requirements easing accorded under H.R. 3700, The Housing Opportunity through Modernization Act, the FHA announced their latest requirements for FHA financing approval of existing condominium developments, which states that owner occupied units shall remain at the current minimum requirement that 50 percent of the units, with an exception for existing developments to drop to 35 percent owner-occupancy ratio in specific cases where current financial documentation can be provided to FHA. In those cases, FHA stated it will allow that ratio to be reduced to from 50% to 35% owner-occupied ratio for existing condo developments if the following requirements are fulfilled:
- HOA must provide 3 years of acceptable financial documents for FHA approval,
- No more than 10 percent of the total number of units shall be in arrears on their condominium association fee payments which means no arrears shall be greater than 60 days past due,
- All financial documents must be provided to show the funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 20 percent of the condo development budget,
- And FHA borrower applications shall be submitted for processing and review under the HUD Review and Approval Process (HRAP) option.
FHA also announced it will maintain its current owner-occupancy requirement of 30% on new development construction, i.e. less than 12 months old, and condo projects involving major rehabilitation.
For additional details and more specifics, refer to: FHA Mortgage Letter 2016-15