What is an FHA-Approved Condo?

FHA-approved condos are condominiums that borrowers can use an FHA loan to purchase. The Federal Housing Administration (FHA) and U.S. Department of Housing and Urban Development (HUD) set rules and qualifications on a condo purchase for which an FHA loan is intended to be used. 

FHA loans for a condo are an attractive, more affordable option when looking for a home, especially in urban areas. Compared to conventional loans, an FHA loan has more lenient requirements when it comes to getting a home mortgage. 

If you are planning to buy a condo with a home loan, make sure both you and your condo qualify for an FHA loan when you talk with a lender. 

FHA approvals can make sure that the condo you are looking at is a safe and good investment. Condos can also come with additional risks that aren’t present in other home options like shared amenities, security and habitability. 

FHA approval could also help protect borrowers from any potential issues that may arise after purchase. 

If the condo you're considering isn’t currently FHA approved, it may still be eligible through the FHA approval process. In these cases, the condo association (HOA) must apply to the FHA to determine eligibility. 

The HOA will need to ensure the project meets all FHA requirements, gather the necessary documentation, and submit the application for review. This can be done through HUD’s HRAP (HUD Review and Approval Process) or through a lender using DELRAP (Direct Endorsement Lender Review and Approval Process), if the lender is approved to do so. 

As a lender, we can support the HOA by helping them understand the benefits of FHA approval, assisting with the documentation process, and potentially submitting the application on their behalf. If full project approval isn’t feasible, FHA also offers Single-Unit Approval, which allows individual units within a non-approved project to be considered for FHA financing under certain conditions. 

To be eligible for an FHA approval, condos must meet all the following qualifications: 

• At least 50% of units in the project be owner-occupied. 

• Condo associations must prove financial stability. Including a review of budgets, reserve accounts, and income/expense statements. 

• No more than 15% of units can be over 60 days delinquent on assessments. 

• Projects must have proper insurance coverage. 

• Projects must be in compliance with applicable state and local laws, and include reviews of the project’s legal standing, governing documents, and adherence to regulations. 

• FHA Mortgage Insurance Concentration based on review type must meet HUD’s standards.  

If your desired condo isn’t FHA-approved, several other options might help you buy the condo. 

Fannie Mae HomeReady® mortgages* make home purchases accessible for low- to moderate-income households.  

The Freddie Mac Home Possible®** has down payment options as low as 3%. This loan allows for flexible sources for a down payment such as assistance programs and family help. Private mortgage insurance (PMI) is required for a Home Possible® loan but can be canceled as soon as you get enough home equity. 

Freddie Mac HomeOne® mortgage is available only to first-time homebuyers. This mortgage also offers 3% down payment options with no geographic or income limits. PMI is required for loans over 95% of the home purchase price.  

You can easily find FHA-approved condos on the HUD website, or use the website to check whether a condo you are looking at is FHA-approved.  

The tool on the HUD website asks for the state, county, condo ID, condo name, city and ZIP code. The less information you fill out, the more results you will get. This is helpful if you are just looking to see the number of FHA-approved condos in an area. 

HUD’s condo finder tool also has a status section, which allows you to see the FHA status of different condos. This section gives you the option of: 

• Approved: Project approved with HUD and eligible for FHA Loan-Level Review 

• Rejected: Project did not meet HUD’s eligibility requirements for approval. Single-Unit Approval may still be possible for individual units, provided certain conditions are met 

• Expired: Project must go through the full review process again. 

• Withdrawn: Project’s review application was withdrawn before a final decision was made. 

The FHA makes its qualifications more accessible to borrowers. As a borrower, you can qualify for an FHA loan with a 500 credit score or for a down payment option as low as 3.5%.  

You can be approved for an FHA loan with a 43% debt-to-income ratio, but a higher debt-to-income could be approved depending on your credit score. The condo you are looking to buy does need to be your primary residency for an FHA loan, and you will be required to have mortgage insurance. When considering an FHA loan, make sure you check what the current mortgage rates are compared to other loan types. 

Talk with a professional lender to see if you and your potential condo qualifies for an FHA loan. 

_{*The HomeReady Mortgage is available to borrowers with 80% or less of area median income for purchase or limited cash-out refinance transactions on one to four unit properties. Additional property restrictions and minimum borrower contribution requirements apply and vary based on number of units of subject property. Occupant borrowers may own one other financed residential property in addition to subject property at the time of closing. Minimum FICO score requirements apply. Up to six months of reserves may be required based on the factors of borrowers' eligibility including but not limited to credit score, debt to income, and loan type. If all co-borrowers are first time homebuyers or when using non-traditional credit to qualify then at least one borrower will be subject to additional requirements regarding homeownership education or counseling from an approved source. Applicants subject to credit and underwriting approval. Not all borrowers will be approved. Restrictions apply. Contact your loan officer for more information and to determine your eligibility.} 

_{** Eligible borrowers must make less than 80% of Area Median Income. Available for first lien conventional mortgages for purchase and no cash-out refinances of owner occupied primary residences including condos, co-ops, and manufactured homes with additional requirements. Minimum down payment and FICO score requirements apply. Homeownership education may be required depending on transaction details. Applicants subject to credit and underwriting approval. Additional restrictions apply.} 

_{Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.} 

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