The FHA has, for a long time, had to deal with complaints about their condo standards. But, as Peter Miller of RealtyTrac explains, they've loosened the way the owner-occupancy percentage is calculated, which could open up the condo market:
HUD still requires that at least 50 percent of all units must be owner-occupied, but now HUD says all units will automatically be non-investment properties unless they are tenant occupied, listed for rent, vacant and listed for sale, or under contract to an investor. If a condo unit is used as a vacation property it will be considered “owner-occupied,” a big deal in Florida and other vacation areas.
But there could be more relief on the way if a new law is passed:
Sponsored by Rep. Blaine Luetkemeyer (R-MO), the proposed legislation would reduce the required owner occupancy level from 50 percent to 35 percent, meaning that a condo owner could still get FHA-backed financing even though most of a project’s units were rented out. Also, the bill would make it easier to get FHA financing when as much as 50 percent of a project’s floor space is used for commercial purposes. This latter provision is designed to encourage the development of mixed-use projects.
Head over to RealtyTrac to learn more about the FHA's new rules for condos.