FHA Condominium Loans

Although there are many Guidelines for FHA Condominium Loans, these are the basics that will determine eligibility.  These requirements are taken directly from the FHA guidelines.


  • Right of First Refusal in Declarations can not violate Discriminatory Conduct under the Fair Housing Act Regulation 24 CFR part 100
  • Commercial Space – No more than 50% of property can be used as commercial space.
  • All units and facilities & phases inside the project must be 100% complete
  • Delinquent Dues:  No more than 15% of units can be in arrears more than 60 days.
  • At least 50% of total units must be sold prior to endorsement
  • Any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units IF at least 50 percent of the total units in the complex are owner occupied as principal residences.  (The previous limit was 10%)
  • No more than 50% of the units can be Rentals / Investor owned.
  • No more than 50% concentration of FHA Loans
  • Sufficient Budget required – at least 10% of budgeted income must go toward a reserve account.
  • Insurance Coverage:
    • Master or Blanket – Must be 100% of replacement cost of condominium, not including foundation or land.
    • General Liability – insuring all common elements,  and public ways
    • Fidelity Bond (aka Employee Dishonesty or Crime Insurance) – for communities with 20+ units.  Covers the Board of Directors and Employees that handle association funds.  Must be 3 months aggregate assessments on all units + Reserves.  Note: This type of insurance is different than D&O insurance.
    • Flood insurance – Only Required if located within 100 year flood plane.

Advantages of the FHA Condo Approval Process

There are some advantages of getting a FHA-backed loan.  One of those advantages is that the government does a lot of work on your behalf.  All prospective homeowners have a legal duty to  preform an inspection of the house and an evaluation of any paperwork linked to the home before going through the purchase.  There is a lot of paper work involved in the condo purchase process, such as HOA documents.  It is important to understand that FHA scrutinizes some of the heavier reading, such as the budget.   FHA won’t approve a complex if some of the shadier or more distasteful condominium practices are occurring.  Another advantage to purchasing an FHA-approved condo is that the hoops the association must jump through aren’t a one-shot deal. They must be re-certified every two years to remain FHA-approved.  Lastly, An FHA-approved condo is easier to sell. If your complex if approved, your prospective buyers increases.

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