FHA Introduces New Guidelines

FHA Introduces New Guidelines

The FHA has been hard at work and two new guidelines were recently established in order to expedite condo projects approvals and reduce risk for the FHA revolving around low credit scores.  

What does this mean for you? Actually, this could be good news for investors and buyers alike. Part of the reasoning behind implementing new guidelines was to assist in the affordable housing crisis. This means there will be more affordable housing for consumers and better multifamily unit investment opportunities.

Condos are a common first home for consumers and the FHA has now made it easier for consumers to access FHA financing. In addition, this should positively affect the amount of inventory on the market, creating more options for buyers. Investors can expect to see an increase in available multifamily projects and lower down payment required for FHA loans.

Related: 6 Reasons Multifamily Properties Are Picking Up Speed 

Here’s the skinny: The FHA updated the underwriting guidelines for low-credit consumers in order to reduce their own personal risk. This means that consumers with credit scores below 620 and a debt-to-income ratio greater than 43% must undergo a manual underwriting process. As of March 18 of this year, investors have experienced benefits as renters are forced to stay in the rental game longer. Why? Because the manual underwriting process for the higher risk bracket of consumers yields far more loan denials. Not great for the eager home-buyer, but good news for rental property owners.

Under a new FHA-issued condo approval rule, investors are required to maintain a minimum of 35% owner occupancy per the total number of units in a multi-family property. In addition, the FHA has agreed to insure a max of 50% of the units within an investor’s condo project. For units greater than 20, 10% or less must be the concentration of the individual owner. For condo projects of less than 20 units, the owner is no longer allowed to own more than one unit, and investing relatives are not allowed to own a unit. For owners, owner-occupancy must be at least 50% and FHA insurance concentration may not go higher than 10% of the number of condos in a given condo project. For individual owners of a condo project containing 20 or greater units, the owner’s concentration must be no greater than ten percent, and no relatives are allowed to own a unit.

There are also limitations for commercial and non-residential space as they cannot exceed 35% total floor area of a given project.

No matter your perspective, all things real estate are ever-changing and education is the key to spending your dollars wisely.

For more information, contact The Aitken Home Team today!

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Phil Aitken, Owner/Broker
Phil Aitken is the Owner/Broker with Your Home Sold Guaranteed Realty - Phil Aitken Home Team and has over 13 years of Real Estate experience. Phil’s faith and desire for his family’s continued security fuel his business growth and leadership. The Phil Aitken Home Team continues to profoundly impact the people of Jacksonville via supporting several faith-based organizations. Phil gives back a portion of every real estate transaction to The Tim Tebow Foundation and Rethreaded. Find Phil's full story here.