FHA Guideline Changes


Looking to buy a condo? 2012 FHA guideline changes are in the works! Getting an FHA loan as a buyer in Boulder just got a whole lot easier.  Need to sell a Boulder condominium?  More communities now qualify for FHA loans!   Where does this good news originate?   FHA modified its guidelines making it much easier for condominium communities to achieve FHA status.   Consider that 3 out of 5 entry level buyers (under $460,000) use low down payment loans such as FHA to buy – and you realize it is a huge advantage for a seller’s community to have access to the largest pool of buyers out there! 

This is the sort of guideline adjustment from HUD and FHA that is going to have an immediate impact on the housing market.

2012 FHA guideline changes

Effective September 13th, 2012, the Federal Housing Authority (FHA) made significant changes to the guidelines it uses in making loans to consumers.  These new guidelines will have a major impact on condominiums nationwide  and could spark a bigger revival in the local housing market.

Specifics of the guideline changes

Troutfarm condo bordered by a greenbelt in Boulder. Condos are two to three storie high, with red brick on lower levels.
Trout Farm, Boulder

The four guideline modifications involve board member responsibility for HOA statements; the ratio of commercial to residential space in a community; investor ownership of a percentage of units by one major player;  and how late dues payers in a community affect FHA funding for the association. 

Monumental 2012 FHA guideline changes To Ownership Percentages

The Federal Housing Authority (FHA) will now allow a single investor to own up to 50% of the units in a condominium community.   The prior limit was ten percent.  Trout Farm, located near Folsom and Valmont in Boulder, will be an immediate beneficiary of this dramatic change.  A single investor has owned a large swath of condos in that community since its inception.  Now, for the first time, the community can become FHA compliant – provided it meets all the other existing guidelines.

FHA will also allow a larger percentage of a community to be commercial space.  Again, this is great news, as “Mixed Used” projects have been very popular of late. Mixed Used creates commercial space – frequently restaurants, pet stores, retail and office space, etc., on the ground floor and residential condo space on upper levels. 

One Boulder Plaza is a great example of this concept.  And while most units in One Boulder Plaza are priced out of FHA limits ($460,000 in Boulder), the permanently affordable condo in that complex will now be eligible for a 3 and 1/2 percent down loan (again, provided the community applies for and meets all FHA guidelines).

The rules change regarding board members changes the language of what those volunteers on boards and HOA’s are attesting to.  This change is appreciated by the Community Associations Institute.   There was previously the perception that volunteer owners could be subject to lifelong responsibility for statements made regarding an HOA and its community.

Finally there is a change regarding late payments of dues.  This 2012 FHA guideline changes and adds flexibility for communities dealing with owners who are behind on payments and still allowing the community as a whole to qualify for FHA loans.

Getting FHA status

This past year I had a firsthand experience in assisting a community with regaining FHA eligibility.  The process is arduous and requires adherence to some exact guidelines that are not common sense.  Should your community need to become re-certified for FHA, I strongly encourage retaining a professional from the beginning to assist in this process.

Beyond Boulder, expect to see these guideline changes have an immediate impact on ski towns where condo communities frequently have a large percentage of non-resident owners, commercial space on the ground floor and/or investors owning a large percentage of units.  This FHA guideline change is great news for all of Colorado.

Sources for this article included Robert Freedman’s article in the Nov/Dec issue of Realtor Magazine entitled FHA revises Condo Rules and The Los Angeles Times article FHA eases burdensome condo financing rules by Ken Harney.

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3 thoughts on “FHA Guideline Changes”

  1. Thanks for the very usable updated news about FHA Condo Project guidelines. The low minimum down payment does serve an important segment of home buyers, AND FHA interest rates are reliably .250% BELOW conventional rates. This can be an reduction of almost $350 per year in interest. In most cases, FHA rates are even lower compared to conventional loans for condos, which have an additional rate bump for condo loans with low down payments.

  2. Great post Bob!

    Although they changed guidelines regarding late payment of dues, I would still keep a keen eye on just how many unit owners are late, and how that is affecting the associations overall budget for the year. The last thing you want is to put a buyer into an association that has to increase HOA dues to avoid default, restructuring, etc. Personal experience has shown me this outcome puts a ton of financial strain on the buyer resulting in a negative outcome for the association and client.


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