Recent improvements to FHA’s condo eligibility criteria is excellent news for Hawaii residents, especially young, first-time buyers and for seniors who own condo units and need a reverse mortgage to supplement their post-retirement incomes.
Here’s Why: FHA financing offers not only 3.5 percent minimum down payments (which can be gift funds) but is far more lenient than other loan programs on crucial issues such as credit scores and debt- to-income ratios. Borrowers can be approved with less than perfect credit.
But if a condo building is not certified as eligible for financing by FHA, all the individual units in the project are also ineligible for FHA mortgage financing. Families can’t buy using FHA loans, homeowners can’t refinance with an FHA loan, and seniors can’t tap their equity through a reverse mortgage.
Last month FHA changed their condo approval guidelines, opening the door to the possibility of more FHA approved condo complexes on Maui for homebuyers seeking FHA financing. The new changes simplify controversial certification procedures for condo buildings and amend other rules that have knocked thousands of condominium buildings out of eligibility. FHA once financed 80,000 to 90,000 condo units annually, but last year’s volume fell below 23,000.
Reduces the FHA condo owner occupancy ratio from 50% to 35%, unless FHA takes alternative action within 90 days.
Directs FHA to streamline the condo re-certification process. Provides more flexibility for mixed use buildings.
Prior to the news breaking about FHA’s improved eligibility criteria, Rebecca Ross, President at Elite Lending, and I completed the application process to secure an FHA Approval for the highly desirable condo community of Iliahi at Kehalani. The process was indeed challenging, and in the end we were able to secure the approval which opens a new door to affordable home ownership to Maui residents.