IN THIS ARTICLE:
What Are FHA-Approved Condos?
FDA-approved condos are condos that meet the US Department of Housing and Urban Development (HUD)’s property eligibility requirements. If you want to buy a condo using an FHA loan, the condo must meet these requirements and be included on the FHA Condominium Approval List. Condo associations must apply to have their project added to the list.
Want to see if a specific condo complex is approved by the FHA? Search the master list of FHA-approved condo projects.
Exceptions: Site Condos
If the condo development is not on the list or the approval has expired, then the project would need to be approved or re-certified before an FHA loan can be obtained. However, there is one exception: a “site condo.” Site condos must meet the following criteria:
- A unit is encumbered by a condominium declaration/covenant or condominium form of ownership.
- Units are single-family and completely detached from each other. This includes garages, archways, breezeways/porches/decks or any other attached buildings.
- A condominium unit consists of the entire structure, site and air space, and no part of the structure is considered to be common areas or limited common areas.
- Insurance and maintenance costs fall solely on the unit holder.
- Any common assessments collected are for amenities that are outside the footprint of the individual units.
HUD has issued a temporary approval process for condo project that will expire on August 31, 2016. The agency is expected to come out with the new permanent guidelines before the expiration date.
General Approval Guidelines
- Projects must consist of two or more units.
- No more than 25 percent of the project’s total floor area can be used for non-residential/commercial use (exceptions can be approved by HUD up to 50 percent).
- No more than 10 percent of the units can be owned by one investor/entity (unsold or unoccupied units held by the builder are excluded).
- No more than 15 percent of all units’ homeowners association fees can be 60 or more days delinquent.
- Units must be covered by hazard, flood, liability and other insurance required by state law and acceptable to HUD (Fidelity Bond is required for properties that have 20 or more units).
- Financial documents needed for review are the current year’s budget, current balance sheet, actual income and expense statement for the project, and possibly bank statements.
- At least 50 percent of the total units in the project must have been conveyed or be under a bona fide contract for purchase to owner-occupant principal residence purchasers.
Condominium project approvals will expire two years from the date of placement on the FHA-approved condo list. Every two years the project needs to be re-certified to confirm that it is still in compliance with HUD requirements. The recertification process can start six months prior to the expiration date until six months after the expiration date. If this is not concluded in this time frame, a complete re-approval must be done.
Recertification packages may be submitted by the mortgagee (staff authorized by mortgagee), builder, developer, homeowners association, management company or an attorney or project consultant who submits on behalf of one of the other referenced parties. Applications received directly from borrowers, homeowners, sellers or real estate agents generally will not be processed and will be returned to the submitter; but HUD may determine, on a case-by-case basis, that alternative sources of submission may be allowed.