FHA condo approval: what the project needs

Two roads to the same loan

The Handbook says FHA will insure mortgages on condominium units in approved condominium projects, approved either through HUD's own review (HRAP) or through a lender review (DELRAP). It will also insure units approved one at a time under the Single-Unit Approval section, and units that meet the definition of a site condominium. Two kinds of transaction need no approval at all: purchases of HUD-owned (REO) homes and streamline refinances. That list explains why a buyer is sometimes told the building is fine and sometimes told it is not eligible: the answer depends on which road the loan takes, and the tests differ. The checker above runs either set.

The approved-project tests, one by one

For a unit in an approved project the lender confirms the project is on the approved list on the day the case number is assigned, and enters the FHA Condo ID. It then checks the numbers reported on form HUD-9991. Owner occupancy must be at least 35 percent of the units. Units in arrears, meaning units whose association dues or special assessments are more than 60 days past due, may not exceed 15 percent of all units; late fees and administrative expenses are not counted. Individual owner concentration is limited too: in a project with 20 or more units one owner or related party may hold 10 percent or less, and in a project with fewer than 20 units no owner may hold more than one unit and no related party may own a unit. Affordable housing units owned by qualifying governmental or nonprofit programs are exempt from that last test if recorded legal documents identify them.

How owner occupancy is counted

The Handbook gives a precise recipe. A unit counts as owner-occupied if the owner uses it as a place of abode for any part of the calendar year and does not rent it for most of the year. A unit listed for sale, not for rent, that the owner previously lived in also counts, and so does a unit sold to a buyer who intends to live there and not rent it for most of the year. A unit owned by the builder or developer is not owner-occupied. For a project built in legal phases, the count covers the first declared phase and later phases cumulatively. An unsold developer unit therefore does not help the ratio.

A worked example

Take a 60-unit building. Thirty-five owner-occupied units gives 58.33 percent, which clears 35 percent. Ten units more than 60 days behind on dues is 16.67 percent, which is over the 15 percent limit, so the project fails on arrears even though occupancy is strong. Six units held by one investor is exactly 10 percent, which passes, while seven is 11.67 percent, which does not. Nine of the 60 units carrying FHA loans is 15 percent, far below the 50 percent point at which FHA may suspend new case numbers. Enter your own counts to run this arithmetic.

Insurance the lender has to verify

Beyond ratios, the lender verifies insurance. The association must carry a master or blanket hazard policy covering the full insurable replacement cost of all units and insurable common elements; if the policy has a coinsurance clause it needs an agreed amount endorsement, the agreed value option or enough coverage to meet replacement cost. The association must be the named insured, or an affiliated entity may be listed. If the master policy does not cover the interior of the unit, the borrower needs a walls-in (HO-6) policy. Flood insurance follows the separate flood requirements when the project sits in a special flood hazard area.

Single-Unit Approval

If the project is not on the approved list, the loan can still work under Single-Unit Approval. The application must receive an Accept from the TOTAL Mortgage Scorecard or, if underwritten by hand, have a maximum loan-to-value of 90 percent. The project must have at least five units, a certificate of occupancy or equivalent for all units in the complete project or legal phase, and one for the subject unit issued at least a year ago or the unit must have been occupied. It cannot be a manufactured home, cannot have ineligible characteristics, and must meet the free-assumability rule in 24 CFR 203.41. The concentration cap is tighter than for approved projects: FHA may suspend case numbers when more than 10 percent of units in a project of 20 or more carry FHA loans, and with fewer than 20 units the number of FHA loans cannot exceed two. The project must also have an Owner Occupancy Percentage of at least 50 percent (builder-owned units do not count), no more than 15 percent of Units in Arrears, and Individual Owner Concentration of 10 percent or less in projects with 20 or more Units (no owner may hold more than one Unit, and no related party may own a Unit, in projects with fewer than 20 Units).

Getting a project approved

A project approval request can come from a lender, builder, developer, association, management company, project consultant or an attorney acting for one of them, and FHA does not pay the fees. There are three review types. A full review is needed for a project FHA has never approved, or one whose approval has been expired for more than six months. A recertification review can be filed no earlier than six months before the expiration date or no later than six months after it; outside that window the project must reapply for a full review. A phasing review covers another legal phase of an approved project. This page does not list every document in the submission.

Sources

• HUD Handbook 4000.1, Update 18 PDF: Condominiums (11/10/2026)(08/19/2024), Handbook pp. 507-518; Condominium Project Approval, Project Approval Submission, pp. 807-809. Read November 2, 2026.
• HUD, Single Family Housing Policy Handbook 4000.1 information page. Read November 2, 2026.

Text read: HUD Handbook 4000.1, FHA Single Family Housing Policy Handbook, the clean Update 18 PDF that HUD links from its Handbook 4000.1 information page (HUD lists it as the August 12, 2026 update). Section headings carry their own effective dates, given above for this page. A heading with two dates, such as (11/10/2026)(06/27/2025), shows a revised date written over the prior one. Confirm current dollar limits and premium rates with an FHA-approved lender. This page paraphrases the Handbook and does not replace it. Page numbers cited are the Handbook's own and may be approximate; use the section headings to locate the text.