Effective Today - FHA lowered occupancy requirement from 50 to 35% on Condos

The Federal Housing Administration eased rules on condominium financing, a move that drew praise from the industry and could boost mortgage lending to lower-income and first-time homebuyers.

In a letter to mortgage lenders, the FHA said it lowered the owner-occupancy requirement on condominiums from 50 percent to 35 percent, effective today.

"While having too few owner-occupants can detract from the viability of a project, requiring too many can harm its marketability," the agency said in a press release. "It is FHA's position that owner-occupants serve to stabilize the financial viability of the projects and are less likely to default on their obligations to homeowner associations than non-owner occupants."

The move allows more condo buyers to qualify for FHA-insured loans. It applies only to projects that meet certain capital reserve requirements.

Congress passed legislation in July forcing the agency to lower condo occupancy limits by the end of this month or accept an automatically imposed level of 35 percent, an effort that was already under way at the agency.

The National Association of Realtors called the FHA move "a big win" for its members.

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