What is the fundamental issue?
After more than a decade of advocacy by NAR, FHA has published new condominium guidelines that reduce burdens on properties to become approved.
I am a real estate professional. What does this mean for my business?
We believe the new changes could result in 60,000 more units available per year.
Condominiums continue to be the most affordable homeownership option for many first time buyers, small families, single people, and older Americans. NAR strongly supports loosening FHA’s condominium rules to ensure that more homeowners will be able to sell their units, and homebuyers will have more opportunities to buy affordable properties.
On August 14, 2019, HUD published the long-awaiting condo rules; which went into effect on October 15, 2019. These rules reduce owner-occupancy requirements for some properties; raise commercial space limits; extend approval time frames; re-instate single-unit approval, and reduce the burdens of the re-certification process. NAR estimates this could provide up to 60,000 more condominum units for FHA buyers per year. NAR is now monitoring the implementation to ensure the program works as well as expected.
Federal Financing and Housing Policy Committee
None at this time
Issue Summary - FHA Condo Financing
Letters to Congress - FHA Condo Financing
Letters to federal agencies - FHA Condo Financing
Congressional testimonies- FHA Condo Financing
NAR Library & Archives has already done the research for you. References (formerly Field Guides) offer links to articles, eBooks, websites, statistics, and more to provide a comprehensive overview of perspectives. EBSCO articles (E) are available only to NAR members and require the member's nar.realtor login.
Condos: The Basics
Condos: Everything You Need to Know (Rocket Mortgage, Apr. 4, 2023)
Condo owners are responsible for what goes on within their individual units, including maintenance and repairs. Beyond that, they’re required to pay regular fees to a condo association. Those fees contribute to the maintenance of the shared common areas, building amenities and the exterior of the complex.
Should I Buy a Condo? The Pros and Cons (realtor.com®, Jan. 9, 2023)
Condominiums can be a good investment, especially if they allow you as a buyer to enter the real estate market. Qualifying for financing is much the same as getting a mortgage for a single-family home. If you are purchasing condos as investment properties, you should be able to find a lender as well.
7 Tips for Buying a Condo in 2023 (Bankrate, Dec. 16, 2022)
If you’re thinking about buying a condo, it’s important to understand what your purchase includes. No matter how big the building or property is, you own your individual unit. You also own a pro-rata share of common areas and amenities of the community with your neighbors, which can include parks, pools, playgrounds, gyms, dog-walking areas and other public spaces. This also includes the land underneath the structure.Condo Buyer's Guide (Fannie Mae)
“Condos represent a community form of ownership. In addition to your monthly mortgage payment, local property taxes (in most areas), and insurance costs, you will pay a condo fee that may also be referred to as “homeowners’ association” (HOA) dues or fees.”
Home Owners Associations (HOAs) and Fees
63% of Members in a Homeowner Association Say They’re Priced Fairly, But Fees are Rising (Forbes, Feb. 22, 2023)
The grass isn’t always greener in a controlled community, as 35% report their HOA is too expensive. Of those who feel they’re overpaying, 73% say their dues have increased in the past year.
HOAs: What You Need to Know About Homeowners Associations (Credible, Feb. 22, 2023)
Low HOA fees may indicate the board of directors provides fewer services or more lenient community rules. However, relatively high fees for your city don’t automatically guarantee you receive more amenities or a better quality of service. Therefore, it’s important to investigate the association’s reputation to make sure they wisely use your money.
New 2023 Condo and HOA Laws for U.S. States (HOA Alliance, Jan. 16, 2023)
Bills are often created to resolve widespread problems impacting condominium and homeowners associations. Many of these new bills will either help to clarify rules or improve processes for owners and communities. If you have any questions about a law that is coming into effect in your city or state, please reach out to your lawyer.
The Condo Market
What DC Condo Sales Say About the Housing Market (Washingtonian, Apr. 4, 2023)
The good news: Agents expect this year’s condo market to be healthy, with increased demand as first-time buyers get comfortable with current mortgage rates and more people move back to the city. As of January, the median sale price for condos was 6 percent higher than the same time last year, according to Bright MLS.
South Florida’s Aging Condo Stock, High Costs and Hungry Developers Create a “Perfect Storm” (The Real Deal, Mar. 16, 2023)
“This ranges across the whole economic gamut,” he said, including the least expensive condos whose owners are unable to fund expensive repairs. “Some of these things are literally going to put people on the street. … I think there is going to be a real affordability crisis.”
The Housing Market Has Started to Recover (Redfin, Jan. 25, 2023)
Condos and higher-priced homes are still a struggle to sell. Redfin agents report that sellers of expensive homes and condos are offering buyers incentives to close deals.
In Texas, You Can Be Forced to Sell Your Condo (Texas Public Radio, Jan. 24, 2023)
In Texas, condo owners can be forced to sell their homes. A state law passed three decades ago allows the sale of a condo complex to go ahead with just 80% of the complex in agreement; each condo typically gets a vote proportional to its size. Once the deal is final, any remaining objectors have to sell their homes.
Is That Condo Building Structurally Sound? (REALTOR® Magazine, Jul. 28, 2021)
“Urge buyers who identify or suspect red flags, either of a structural or a financial nature, to consult with a qualified expert before making a purchase.”
What is an FHA-Approved Condo? (Bankrate, Mar. 30, 2023)
FHA loans are insured by the Federal Housing Administration. They’re meant for first-time homebuyers or those who haven’t owned property in the last three years. An FHA-approved condo is a condominium that is eligible to be purchased with an FHA loan.
Condo Loans: Defined and Explained (Rocket Mortgage, Mar. 3, 2023)
It’s important to note that condo loans can be a bit different than the way we would typically think of a traditional mortgage and are instead a form of specialty financing that can be used to purchase a condo. With condos and other types of properties that use mortgage financing there may be a different set of rules and qualifications needed to obtain one of these loans.
How to Get a Non-Warrantable Condo Loan (Banks.com, Jan. 7, 2023)
A non-warrantable condo loan is a type of mortgage that doesn’t meet the strict guidelines set by Fannie Mae and Freddie Mac, government-sponsored agencies that purchase mortgages in the U.S. Since non-warrantable condos pose a high risk to lenders, you may have a difficult time finding a mortgage lender that underwrites condos deemed “non-warrantable.” And if you do, you’ll probably pay high interest and provide a sizeable down payment.
Guide to Getting a Condo Mortgage: What You Need to Know (PennyMac, Sep. 6, 2022)
As mentioned before, the down payment that you make on your condo purchase can have a big impact on your loan rate. You will need to put at least 25% down on a condo to get the lowest rates possible on a Fannie Mae loan, but remember the more you put down, the more your rate can decrease. FHA loans allow down payments of as little as 3.5% on condos, but rates may be higher than if you put down more money. The options available to you will depend on both your credit and the complex you are interested in.
VA Loan Guaranty (United States Department of Veterans Affairs)
“After registering with AccessVA, you will be able to work in the new Loan Guaranty site”
Related WebsitesCommunity Associations Institute
“CAI provides information, education and resources to the homeowner volunteers who govern communities and the professionals who support them. CAI members include association board members and other homeowner leaders, community managers, association management firms and other professionals who provide products and services to associations.”
Condominiums (United States Department of Housing and Urban Development) —
“The Condominiums page allows users to search for FHA-approved condominium projects by location, name, or status. These properties are not for sale by the FHA.” Search by city.
Institute of Real Estate Management
“Total of U.S. market managed by CPM members: Condos/Co-ops/HOAs – 13%.”
Living in a Housing Cooperative (National Association of Housing Cooperatives)
“As a democratic organization that follows the cooperative principles, cooperatives give you a voice in the operation of your cooperative. The rights and responsibilities of shareholders are outlined in the various cooperative documents, including the bylaws, occupancy agreement/proprietary lease, and articles of incorporation.”
Condo, Co-op, and Planned Unit Development (PUD) Eligibility (Fannie Mae)
“Step 1: Determine a Condo Project Review Type Step 2: Follow the Condo Project Review Type Requirements Step 3: Confirm the Condo Project Insurance Requirements”
Condominium Unit Mortgages (Freddie Mac)
“Who are Condominium Unit Mortgages for? Borrowers who want to purchase a qualifying condominium.”
eBooks & Other Resources
The following eBooks and digital audiobooks are available to NAR members:
The Complete Guide to Purchasing a Condo, Townhouse, or Apartment (eBook)
The Condominium Concept (eBook)
Condo Owner's Answer Book (eBook)
Financing Your Condo, Co-op, or Townhouse (eBook)
How to Buy a Condominium or Townhouse (eBook)
Make Money with Condominiums and Townhouses (eBook)
Tips & Traps When Buying A Condo, Co-Op, or Townhouse (eBook)
Your Dream Home: A Comprehensive Guide to Buying a House, Condo, or Co-op (eBook)
Books, Videos, Research Reports & More
As a member benefit, the following resources and more are available for loan through the NAR Library. Items will be mailed directly to you or made available for pickup at the REALTOR® Building in Chicago.
Condos and Co-ops (Chicago, IL: Dearborn Real Estate Education, 2006) HD 1377 M48c
Everything You Need to Know Before Buying a Co-op, Condo, or Townhouse (New York, NY: AMACOM, 2006) HD 1341 R74
Condominiums: The Pros and Cons of Ownership (Port Orchard, WA: Windstorm Creative, 2005) HD 1377 L16
Make Money with Condominiums and Townhouses (Hoboken, NJ: John Wiley, 2003) HS 1377 E2
How to Invest in Condominiums: The Low-risk Option for Long-term Cash Flow (New York, NY: John Wiley & Sons, 2002) HD 1377 V81
The Condo and Co-op Handbook: A Comprehensive Guide to Buying and Owning a Condo or Co-op (New York, NY: Macmillan, USA, 1998) HD 1377 W86
How to Buy an Condominium or Townhome: with Sample Forms and Worksheets (Naperville, IL: Sourcebooks, 1997) HD 1377 Ir9
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