Real Estate News

New rules could make it easier to get mortgages for condos

A condo tower under construction in the Edgewater neighborhood.
A condo tower under construction in the Edgewater neighborhood.

Condos are often the most affordable option for first-time homebuyers, but federal rules have made it hard to get mortgages on them.

That could change with new rules released last week by the Federal Housing Administration.

The FHA offers a 3.5 percent-down loan that appeals to many buyers looking for their first home. But condo units weren’t eligible for the favorable loans unless they were in a building that was at least 50 percent “owner-occupied.”

That eliminated buildings that were mostly occupied by renters and vacationers.

Under the new rules, which are temporary and last for one year, second homes will now be considered owner-occupied, provided they do not belong to investors.

That means condos owned by South Florida’s large snowbird population could become eligible for financing, increasing the inventory available to buyers and making it easier for sellers to unload their units.

In a statement, the FHA said it was planning a “more comprehensive condominium rule change” for when the new rules expire. The agency has faced strong criticism from politicians and real-estate professionals who said the old rules on condos prevented low- and middle-income renters from buying their first home.

Before the financial crisis, the FHA approved loans on a unit-by-unit basis, instead of looking at the building as a whole. Bringing back the old system would, according to South Florida mortgage lender Brian Tewes, “dramatically increase the available properties” on the market.