By JOSH BOAK
AP Economics Writer
WASHINGTON (AP) — The Federal Housing Administration is changing regulations to make it easier for more first-time condo buyers to obtain mortgages.
The federal agency on Wednesday released new guidelines governing the types of mortgages it will insure at condominiums. Just 6.5% of the 150,000 condominium developments in the United States previously qualified for FHA-backed mortgages. But the FHA will start backing mortgages for individual units and will have greater leeway to respond to changes in market conditions.
Brian Montgomery, the FHA commissioner and acting deputy secretary of the Housing and Urban Development Department, said the changes will make it easier for first-time buyers, retirees and minorities to become homeowners. Unlike conventional mortgages that require 20% down payments, the FHA backs loans that require 3.5% down payments.
As regulations tightened after the housing crash, the number of FHA mortgages for condos fell from 72,900 in 2010 to 16,200 last year. The rule change is expected to increase the number of FHA mortgages for condos by from 20,000 to 60,000 units.
The wider use of mortgages could increase construction by 7,000 condos, according to an analysis last year by HUD.
It’s unclear just how much the expansion could increase U.S. home ownership, as prices have risen faster than incomes and the inventory of homes on the market has fallen below historical averages.