July 27, 2021

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What is an FHA-approved condo?

When buying a home or condo with a traditional loan, you will need a 20 percent down payment. If you can’t make that much money, you have another option: one FHA loansthat is insured by the government and only requires 3.5 percent less.

A large brick building: A condominium building

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A condominium building

These Low Down Payment Loans are usually done for single family homes, however Condominium loan are also eligible. Unfortunately, it wasn’t always easy to find FHA-approved condos, but a rule change that went into effect in 2019 eased restrictions and made it easier for more condos to meet FHA loan eligibility requirements.


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When looking for this type of condominium mortgage, understanding what it is and what it means to you as a buyer is important.

What is an FHA Approved Apartment?

FHA loans are insured with the Federal Housing Administration (FHA). They are intended for first time buyers or those who have not owned a property in the last three years. An FHA Approved Condo is a condominium that can be purchased with an FHA loan.

“This makes them a particularly popular condo choice that attracts many first-time buyers,” said Will Rodgers, real estate agent at Keller Williams Realty in Virginia. “This is because they are usually the cheapest option.”

Not all condominiums offer buyers the option to finance them with an FHA loan. Some housing associations are not keen on attracting owners who require a lower down payment to qualify. These associations may believe that this means that these owners are more likely to default.

How to Find an FHA Approved Apartment

Before you find your dream home, check to see if it’s FHA approved. You can search the list of FHA Approved Condos in the US Department of Housing and Urban Development (HUD). website. Find condominiums near you that are FHA approved.

Ashley Romiti, a licensed real estate agent and a member of Home Life Digest’s advisory board, says that when doing your research, don’t forget about fees and condominium requirements.

“Make sure you consider club fees, condominium bylaws, cash reserves, and amenities,” says Romiti. “Speak to a lender to learn about the next steps. They will look for the lender who can offer you the lowest interest rates.”

You should follow similar steps as you would if you were looking for a home loan, such as:

  • Get your credit score as high as you can before you get one pretested
  • Save on a down payment, even if you can only bet the 3.5 percent minimum
  • Only buy what you can afford

Also, find a real estate agent who not only knows their future neighborhood but is also familiar with FHA approved condos.

FHA approval requirements for condominiums

Before you start buying an FHA approved condo, make sure you understand which condos are required to qualify:

  • According to the HUD, the property or project must be completed. If a project is still under construction, it is not qualified.
  • No more than 50 percent of the units can be used as rental properties or owned by investors. This means that you have to buy the device and actually live in it.
  • The property must be insured and the housing association must hold at least 10 percent of the HOA budget in a cash reserve.
  • No more than 35 percent of the property may be used commercially.

There are other restrictions, e.g. B. the ban on FHA loans for condominium units (condos with many hotel-like amenities that units rent out to vacationers) or condominiums in undesirable areas, e.g. B. near a landfill or an airport.

What is the Process to Get a Condo FHA Approved?

Condos wishing to accept buyers who borrow an FHA loan must go through an approval process and recertify every three years in order to remain eligible for FHA loans. Under the new rules, individual condos may be eligible for FHA loans even if the full development has not been approved by the FHA. This type of individual approval is known as sampling approval.

The approval process depends on the original structure for which approval is requested. For example, older buildings may have a longer approval process than new projects.

Condo developments to be approved must complete the HUD Review and Approval Process (HRAP) or the Direct Endorsement Lender Review and Approval Process (DELRAP) for Lenders. Once a condominium has been approved by HRAP or DELRAP, it will receive a condominium ID used for the project and a submission number.

Pros and Cons of FHA Approved Condos


  • Higher pool of applicants – HUD estimates that 84 percent of FHA-insured condo buyers have never owned a home. This allows condominiums to keep open units to a minimum and increases the number of potential buyers who can be approved for mortgages.
  • Flexible terms for owners – FHA-approved condos offer the same flexibility as traditional homes: low down payments, milder loan requirements, and the government owns the loan rather than a private lender.
  • More choice for potential buyers – The more FHA-approved condos there are, the more opportunities for families to own homes and build equity instead of renting.


  • Mortgage insurance is required – – Mortgage insurance is required for FHA loans as they accept less than 20 percent for a down payment. This increases the cost of your monthly payments.
  • Recertification is required – In the case of condominiums, the recertification effort can be considerable, although the recertification process now takes place every three years instead of two years.
  • Units still limited – “It’s important to understand that the amount of FHA funding in a building is not perpetual,” said Esther Phillips, senior vice president of Key Mortgage Services in Chicago. “In a non-FHA-approved building, only a certain number of condominiums can be funded by the FHA.”

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