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New FHA Condo Rules

In a powerful move last week, HUD introduced a new set of guidelines for FHA insurance eligibility for condominiums. These could not have come at a better time. There are over 150,000 condo projects nationwide, but only 6.5 percent (less than 10,000) are currently FHA approved. Meanwhile affordable housing, or lack thereof, has become an issue at the epicenter of many people's lives across the country.

With its new condo policy, HUD estimates an additional 60,000 condo units a year could become eligible for FHA insured financing. For many first time homebuyers, moderate income families, millennials, and seniors condos provide an incredible option for affordable housing. Furthermore, for real estate developers and investors just starting out, condos can provide an affordable point of entry into the business.


Effective October 15, 2019:

Single-Unit Approvals (aka "Spot Approvals")

The FHA has revived spot approvals, or approval of individual units in a condo project or complex, even if the entire complex is not FHA approved. The FHA will insure mortgages for selected condominium units in associations that lack FHA approval, so long as: 

The individual unit is located in a completed project that's not approved;If the project has 10+ units - at the most only 10% are FHA-insured;If project has <10 units - at the most only 2 are FHA-insured.

Mixed Use Projects

The FHA has increase the total floor area of a condo project that can be commercial or non-residential space from 25% to 35%, which many estimate will further expand the number of complexes nationwide that can be eligible.

Condo Recertification

The time frame current FHA approved condo associations have to maintain their approval status (in a process called recertification) has been extended from 2 to 3 years. This may be especially helpful for current associations contemplating not re-certifying. Maintaining FHA compliance is both costly and time consuming, and if so much as one fact is found to be incorrect, the punishments can be steep.


This is exciting news as both buyers and beginner real estate developers and investors stand to benefit. By increasing the number of condos that become FHA eligible, buyers have more options other than rent an expensive apartment or buy a full blown home. Likewise, condos that are in disrepair have always been an excellent starter project for even the most novice developers, as your main concerns are really don't piss off the HOA, make the inside look amazing, and add value where you can (a bedroom, an office, a den). With these new guidelines, the potential buyers a developer can reach out to has increased that much more.


Check a Condo's FHA Approval Status: Here

HUD News Release : Here

New Law: Here

Single Family Housing Handbook: Here

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