Could the Federal Housing Administration finally be opening its doors again to financing more condominium units? If so, that could be excellent news for young, first-time buyers and for seniors who own condo units and need a reverse mortgage to supplement their post-retirement incomes.
Here’s why: FHA financing offers not only 3.5 percent minimum down payments but is far more lenient than other options on crucial issues such as credit scores and debt-to-income ratios. Plus FHA is the dominant source of insured reverse mortgages — the only game in town for the vast majority of seniors.
But if a condo building is not certified as eligible for financing by FHA, all the individual units in the project are ineligible for mortgage financing as well. Young families can’t buy using FHA loans, sellers can’t sell and seniors can’t tap their equity through a reverse mortgage. It used to be different — for years FHA allowed so-called “spot” loans on individual units — but no more.