FHA Issues New Condominium Approval Rules

Yesterday, August 14, 2019, the Federal Housing Administration (FHA) issued significant policy revisions to its condominium approval process. In addition to changes to the condominium project approval policy, the new policy provides a “single-unit approval process” for individual condominium units to be eligible for FHA mortgage insurance, even if the condominium project is not FHA approved. In addition, the new guidelines extend the recertification for approved projects from 2 to 3 years and will allow more mixed-use projects to be eligible for FHA insurance.

Here are a few more specifics as to changes to FHA’s Single Family Handbook:

  1. Single-Unit Approval Process. As of October 15, FHA will insure mortgages for select condo units in projects that are not currently approved. An individual unit may be eligible for Single-Unit Approval so long as the completed project is not approved and for projects with 10 or more units, no more than 10% of the units can be FHA insured (for projects with fewer than 10 units, no more than 2 FHA-insured units can be FHA insured).
  2. Minimum Owner-Occupancy Requirements. For most projects, approved condominium projects must have a minimum of 50 percent of units occupied by owners.
  3. FHA Insurance Concentration in Condominium Projects. FHA will only insure up to 50% of total units in an approved project.
  4. Commercial/Nonresidential Space Limits. Commercial/non-residential space within an approved condominium project may not exceed 35 percent of total floor area.

The new policies take effect October 15, 2019.

A summary of the new rules can be found at this HUD Press Release. For much greater detail, read the FHA Single Family Housing Policy Handbook.

See also the FHA Condominium Loan Level/Single-Unit Approval Questionnaire.