New FHA Guidelines Try To Protect Condo Buyers

Beginning February 1, 2010, FHA will implement new approval guidelines for condominium projects. To qualify for FHA mortgages, associations must:

•Maintain a reserve equal to 10% of the annual budget;

•Make sure no more than 15% of its owners are more than 30 days late with condominium fees;

•Allow lenders to review the HOA's financials and insurance policies;

•No more than 10% of the units may be held by a single investor;

•Fidelity insurance must be obtained for 20+ unit projects; and

•No more than 25% of space may be used for commercial purposes.

Though HOA's may find it painful to fulfill these requirements, in the long-term, meeting these new regulations will protect property values.

Associations that have been dragging their feet to update their HOA documentation will now have a financial incentive to "put their house in order". Lenders, knowing a condominium meets these new rules, will be more willing to lend to an approved project.

And FHA approval can only make the condos more attractive to prospective buyers. Knowing the project meets these new, tighter guidelines, a buyer can have more confidence in the quality of their investment.