Eligibility Requirements For FHA Condo Approval


What are the eligibility requirements for FHA condo approval?

An individual unit in a condominium project can be eligible for financing through a FHA loan only if the entire project has an unexpired FHA condo approval in place. FHA recently made a number of changes to the eligibility guidelines for condominiums. In order get FHA approved, a condo project must meet the following requirements:

Number of Units

The minimum number of units should be at least two or more to be considered as a condominium


At least 50% of the total units in a project must be owner-occupied or sold to those who intend to occupy the property as their primary residence


No single entity or person can own more than 50% of a project. This is allowed only if the previous condition about owner-occupancy is satisfied. This change came into effect from Sept 13th, 2012, changing the previous limit of 10%.

Commercial Occupancy

The space dedicated for commercial purposes should not be more than 50% of the total space in the project. The commercial activities cannot be a hindrance to the individual units intended for residential occupancy. The commercial occupancy ratio has been upped from the previous limit of 25% since Sept 13th, 2012.

Number of FHA loans

There cannot be more than 50% of units financed using FHA loans. Some variations are allowed for fall-outs.

Project Completion

The entire units and related facilities must be fully completed. There should be no outstanding construction work by the time of FHA approval application

HOA Delinquent Dues

There cannot be more than 15% of units delinquent on the HOA dues for more than 60 days.

HOA Budget

From total monthly dues collected by the HOA, at least 10% must go into reserve for the management of facilities.

Pre-Sale / Condo Launch

At time of FHA endorsement, at least 50% of the total units in the condominium must have already been sold.

Legal Issues / Litigation

There should be no ongoing litigation or pending legal issues. Foreclosure proceedings are excluded from this requirement.

Insurance Coverage

There should be sufficient insurance coverage to cover any hazards. A master policy that covers the 100% replacement cost excluding the cost of land and foundation is required. General liability insurance to cover common areas and public ways is also required. Flood insurance is needed if the project is located within 100 year floodplain.

A fidelity bond that covers indemnity (D&O) for HOA board members and employees is required on projects with 20 or more units.

Once all the above conditions are met, the supporting documentation must be submitted to FHA for condo approval. After gaining approval, any individual unit in the approved project will be eligible for financing under FHA loan programs.