Are Condos About to Become More Affordable?

The Federal Housing Administration, once the primary source of mortgage financing for moderate-income and first-time condo buyers, is planning to loosen strict eligibility rules, The Real Deal reports.

The FHA also wants to revive so-called “spot loans” — mortgages for individual units in condo buildings that haven’t received blanket certifications from the agency. That change alone could open up low-down-payment financing for millennials, minorities and others. The proposals would also throw a lifeline to senior owners of condo units who need a reverse mortgage to supplement their retirement income.

A key test of eligibility for FHA is a building’s percentage of owner occupants versus renters. In recent years, FHA has required that at least 50 percent of a building be owner-occupied to qualify. This past summer, Congress passed a bill by unanimous votes in both chambers requiring FHA to drop the threshold to 35 percent within 90 days or provide justification for anything higher. The 90-day deadline is near the end of October.

Chris Gardner, a California-based condo consultant, said it would be a “landmark” decision if the FHA follows through on the spot loan proposal, adding, “It will make so many more purchases happen.”