FHA condo approval: A 2025 guide

Tuesday May 06, 2025

What is an FHA-approved condo?

While individual buyers apply for FHA loans, the condominium itself must be listed on the FHA-approved condo list for financing to be available. To get on that list, the condo association must submit an application and demonstrate that they meet the requirements set by the FHA for mortgage insurance eligibility. These condos go through a review process to confirm they align with FHA's guidelines for safety, financial health, and legal documentation.

In most cases, the entire condo development must be approved, although exceptions exist under FHA's Single-Unit Approval program, also known as “spot approval.”

This article is not intended to and does not constitute legal advice or create an attorney-client relationship. Board members should consult their association’s attorney to discuss the legal implications of their decisions or actions prior to proceeding.

What are FHA loans?

FHA loans are mortgages backed by the Federal Housing Administration (FHA) and designed to help more people qualify for homeownership. They typically require lower down payments, more flexible credit score requirements, and competitive interest rates.

Because of these benefits, FHA loans are popular with first-time buyers, moderate-income buyers, and those who may not qualify for conventional financing. However, FHA loans can only be used in properties that meet FHA standards, including FHA-approved condos.

FHA condo approval requirements

FHA condo approval requirements include both legal and financial standards that a condominium association must meet to be eligible for listing. There are many requirements for FHA condo approval which may vary based on your specific circumstances, but some key requirements may include:

A certain percentage of units must be owner-occupied (this percentage may vary if the project meets additional HUD criteria).
No more than 15% of the units can be more than 60 days delinquent on assessments.
Adequate reserves must be maintained for future repairs and capital expenditures.
The annual budget must contribute at least 10% of aggregate monthly assessments to reserves.
Proper insurance coverage, including fidelity bond insurance (if applicable).
Compliance with local zoning laws and no pending litigation that may affect the property’s solvency.

The application requires submission of governing documents, budgets, insurance declarations, and sometimes an attorney’s opinion letter. FHA condo approval is typically valid for three years and must be re-certified to maintain eligibility. Specific requirements can vary based on project characteristics, and HUD guidance is subject to change. Associations should consult qualified legal counsel to understand how these standards apply to their specific circumstances.

What is spot approval for FHA condos?

Spot approval, formally known as Single-Unit Approval, refers to a case-by-case review of a single unit within a condominium that is not currently on the FHA-approved list. Instead of requiring the entire development to be approved, FHA allows a streamlined application process for individual units in certain eligible projects. Eligibility requirements may include:

The building must contain at least five units.
In developments with 10 or more units, no more than 10% of the total units can have active FHA-insured loans.
In smaller developments with fewer than 10 units, FHA financing may be available for up to two units total.

Eligibility requirements for spot approval can vary and are based on the specific characteristics of the property and the project. Residents and associations should consult with qualified legal or HUD-approved professionals to assess eligibility for Single-Unit Approval in their specific situation.

HUD condo approval process

The FHA loan program is administered by the U.S. Department of Housing and Urban Development (HUD). To get HUD condo approval, a condominium association must submit an application that includes required legal, financial, and operational documentation. This application determines whether the condo meets the standards needed for FHA financing eligibility.

The process generally includes:

Completing HUD Forms 9991 and 9992: These forms outline key project and loan-level characteristics, including owner-occupancy rates, insurance, and legal compliance.
Submitting governing documents: These may include the declaration, bylaws, and articles of incorporation.
Providing financials: A current budget, reserve funding plan, and insurance declarations are usually required.
Verifying project eligibility: This includes confirming the percentage of commercial space, pending litigation status, and delinquency rates.

Many associations work with property management companies like FirstService Residential, legal counsel, or HUD-approved consultants to compile and submit the application. Once approved, the condo will appear on the FHA condo approval list and may be eligible for FHA-financed purchases for three years, after which re-certification is needed.

FHA condo approval FAQs

Why do some condos not accept FHA loans?

Some condos are not FHA-approved because the association has not applied or no longer meets the FHA condo approval requirements. The process involves documentation, ongoing compliance, and periodic recertification, which some associations may choose not to pursue.

How long does FHA condo spot approval take?

FHA condo spot approval typically takes up to 30 business days if all required documents are submitted promptly. Delays can occur if additional information is requested or if the condo association needs time to respond. Actual processing time may vary based on case complexity and HUD’s current workload.

What makes a property FHA-approved?

A property becomes FHA-approved when it meets all FHA standards for safety, legal structure, and financial stability. For condos, this includes owner occupancy rates, delinquency thresholds, insurance coverage, and reserve funding levels. HUD reviews the submitted materials to determine eligibility, but final approval is not guaranteed.

Where can I access the FHA condo approval list?

You can access the FHA condo approval list through the HUD website. The list shows which condominium developments have active FHA approval status. You can search the list online through HUD's official website by entering the condo's name, city, or ZIP code.

Buyers and real estate professionals often refer to this list when evaluating whether a condo purchase can be financed with an FHA loan. Condo associations and boards can also use the list to confirm whether their property is currently approved or if re-certification is needed. FHA condo approval is valid for three years and must be renewed to remain active on the list.

Why don’t some HOAs pursue FHA condo approval?

Some HOAs choose not to pursue FHA approval due to the administrative effort, documentation requirements, and ongoing compliance obligations involved. Others may not meet certain financial or legal criteria, such as reserve funding levels or delinquency thresholds.

If your association is exploring FHA condo approval, a trusted property management partner can provide the structure, support, and guidance to help simplify each step. Connect with our team to learn how we can help your board approach this process with confidence.