Can You Get a Reverse Mortgage on a Condo? FHA Rules and Costs

Yes, you can get a reverse mortgage on a condo, but there’s a step that single-family borrowers skip: the condominium project itself has to clear federal standards before your individual unit can be financed. The most common product, a Home Equity Conversion Mortgage (HECM), requires either that your condo development sit on FHA’s approved list or that your specific unit qualify through Single Unit Approval. The 2026 HECM lending limit is $1,249,125, which caps how much of your condo’s appraised value counts toward your proceeds.¹ If neither FHA path works, a private proprietary reverse mortgage may still be available.

Who Qualifies as a Borrower

You have to be at least 62. You also need to either own the condo outright or carry a mortgage balance small enough that the reverse mortgage can pay it off at closing.² There’s no fixed equity percentage written into the rules, but as a practical matter most borrowers need substantial equity, because the new loan has to satisfy any existing liens before you see a dollar.

The condo must be your primary residence for the life of the loan, and your lender will ask you to certify occupancy every year. If you move to a nursing home or assisted-living facility and no co-borrower stays in the unit, an absence longer than 12 consecutive months makes the loan due and payable.³ You also remain responsible for property taxes, homeowners insurance, and HOA assessments throughout the loan. Falling behind on any of those can trigger default.

Before approval, the lender runs a financial assessment covering your credit history, your residual income after monthly expenses, and any circumstances that explain past financial trouble. If the picture is mixed but not disqualifying, the lender may impose a Life Expectancy Set-Aside, locking away part of your proceeds to cover future taxes and insurance. That set-aside can consume a meaningful share of your available funds, so a strong payment history on HOA dues, taxes, and insurance directly increases the cash you actually receive.⁴

FHA Project Approval Is the Main Condo Hurdle

HUD doesn’t just evaluate your unit; it evaluates the entire condominium development. To finance an individual unit with a HECM, the project generally must appear on FHA’s approved list, and that approval expires every three years unless the association recertifies. The framework comes from 24 CFR 203.43b, with HUD adjusting specific thresholds by notice.⁵

The benchmarks a condo association must clear:

Owner occupancy of at least 50%, meaning half the units are owner-occupied rather than rented. HUD can adjust this between 30% and 75%.⁶
No more than 50% of units in a fully approved project can carry FHA-insured mortgages, a figure HUD can set anywhere from 25% to 75%.⁵
The HOA must deposit at least 10% of monthly assessments into a reserve account for long-term repairs and capital expenses, unless a recent reserve study justifies less.
No more than 55% of the project’s total floor area can be commercial or nonresidential.⁷
The project must be fully built and ready for occupancy, not still under construction or subject to additional phasing.
Litigation involving structural defects or financial mismanagement can disqualify the entire project.

Projects with more than 20 units must also carry fidelity bond insurance covering at least three months of aggregate assessments plus reserve funds. Management companies that handle association finances need their own coverage.⁸ Associations that never pursued FHA approval often don’t carry these policies, which is one of the most common reasons projects fail certification.

Single Unit Approval If Your Project Isn’t on the List

When the whole complex isn’t FHA-approved, Single Unit Approval (SUA) lets a lender evaluate your specific unit without dragging the entire development through full certification. The project must have at least five units and be fully completed. In buildings with ten or more units, no more than 10% can carry active FHA-insured mortgages. Smaller projects are capped at two FHA-insured units total.⁹ The 50% owner-occupancy standard still applies, and the project cannot have been previously rejected for FHA approval. Borrowers whose financial assessment requires a tax-and-insurance set-aside are ineligible for SUA and must use full project approval instead.

One narrow situation is worth flagging. If your condo is a detached, freestanding structure where you handle all interior and exterior maintenance and carry your own insurance, it may qualify as a “site condo” and bypass project approval entirely because it functions like a single-family home.

Proprietary Reverse Mortgages When FHA Won’t Work

If your building can’t get FHA approval and doesn’t qualify for SUA, a proprietary reverse mortgage (sometimes called “jumbo”) is a possible alternative. These are private loans, not FHA-insured, so they aren’t bound by project approval requirements or by the $1,249,125 lending limit. For owners of higher-value condos, they can unlock equity a HECM can’t reach.

The trade-offs are real. Proprietary products lack the federal non-recourse protections that come with HECMs, terms vary significantly between lenders, and interest rates may be higher. They typically don’t charge FHA mortgage insurance premiums, which can lower upfront costs, but disbursement options are usually more limited. State law governs these loans, so eligibility depends on where your condo sits.

How Much You Can Borrow

Your HECM proceeds depend on three inputs: the age of the youngest borrower (or eligible non-borrowing spouse), current interest rates, and the lesser of your condo’s appraised value or the $1,249,125 lending limit.¹ Older borrowers draw a larger percentage of home value because the lender expects a shorter loan term. Lower rates also increase available proceeds.

How you receive the money depends on the rate structure. A fixed-rate HECM limits you to a single lump sum at closing. An adjustable-rate HECM opens up a line of credit, tenure payments for as long as you live in the unit, term payments for a set number of years, or combinations of these.¹⁰ The unused portion of a line of credit grows over time at the same rate as the loan balance, so waiting to draw increases what’s available later. Either way, HUD caps first-year disbursements at 60% of your initial principal limit unless mandatory obligations (like paying off an existing mortgage) exceed that threshold.⁴

Upfront Costs

Several costs come out of your proceeds at closing. The initial FHA mortgage insurance premium is 2% of the appraised value or the lending limit, whichever is lower. On a $400,000 condo, that’s $8,000. An annual MIP of 0.5% of the outstanding balance accrues thereafter and gets added to what you owe.

Origination fees are tiered: 2% of the first $200,000 of home value, plus 1% of the amount above $200,000, with a floor of $2,500 and a ceiling of $6,000. A $350,000 condo generates a $5,500 origination fee. On top of that you’ll pay for HUD-required counseling (typically $125 to $200), the condo appraisal, title insurance, recording fees, and any estoppel or condo questionnaire fees your HOA charges, which commonly run $300 to $500. Most of these can be financed into the loan, but each dollar rolled in reduces the cash you actually receive.

If Your Spouse Is Under 62

Only a borrower 62 or older can be on the HECM, so if you’re married to someone younger, only you sign the loan. HUD’s “Deferral Period” rules let an eligible non-borrowing spouse remain in the home after the last borrower dies, provided certain conditions are met.¹¹ The spouse must have been married to the borrower and identified in the loan documents at closing. Within 90 days of the borrower’s death, the surviving spouse must establish a legal right to remain in the property through ownership, a lease, or a court order, and must continue paying taxes, insurance, and HOA fees while keeping the unit as a primary residence. If any condition lapses, the deferral ends and the loan becomes due.

There’s a cost to this protection. A non-borrowing spouse’s age doesn’t count in the principal limit calculation, so identifying a younger spouse on the loan documents reduces the amount you can borrow. Many couples still find the security worth the smaller loan.

Effect on Taxes and Government Benefits

Reverse mortgage proceeds are loan advances, not income, so they aren’t subject to federal income tax.¹² Interest accruing on the loan isn’t deductible until it’s actually paid, which usually happens when the loan is settled. Even then, deductibility may be limited unless proceeds were used to substantially improve the condo.

Social Security retirement and Medicare aren’t affected, because neither is means-tested. The risk is with need-based programs like Supplemental Security Income and Medicaid, which impose asset limits. A lump sum sitting in your bank account at month-end counts as an available asset and can push you over the threshold. Taking proceeds as a line of credit and spending withdrawals within the same calendar month is the safer approach if you rely on either program. Talk to a benefits counselor before closing.

What Happens to Heirs

The loan becomes due and payable when the last borrower dies, sells the condo, or permanently moves out. Heirs generally have six months to settle, with the possibility of two 90-day extensions if they can document progress toward payoff or sale. They can pay off the balance and keep the unit, sell and use the proceeds to satisfy the debt, or let the lender foreclose.

The HECM’s non-recourse feature is the key protection. If the balance has grown larger than the condo’s market value, heirs will never owe more than 95% of the current appraised value, and FHA mortgage insurance covers the difference.¹³ If the condo has appreciated above the balance, heirs keep the surplus after payoff.

Applying and Getting Funded

Start by checking whether your condo project is already FHA-approved. HUD’s online search tool lets you look up any project by name or zip code.¹⁴ If it’s approved, you’ve cleared the biggest condo-specific obstacle. If not, discuss SUA or full project approval with your lender before spending time on the rest of the application.

Every HECM borrower must complete a counseling session with a HUD-approved agency before applying. The session covers loan mechanics, costs, alternatives, and your obligations. You’ll pay $125 to $200 and receive a certificate the lender requires before moving forward.¹⁵

After counseling, the lender orders a condo-specific appraisal on Form 1073, which evaluates both your unit and the overall development.¹⁶ You’ll also need to provide HOA financial statements, the master insurance policy, a completed condo questionnaire, and government-issued ID. Underwriting matches everything against FHA standards.

Once you sign closing documents, a three-day rescission period runs before funds become available, and you can cancel during that window for any reason without penalty.⁴ From initial counseling to first disbursement, plan on 30 to 60 days when the condo project is already FHA-approved. Add weeks or months if project approval or SUA is still pending.

1
U.S. Department of Housing and Urban Development (HUD). HUD Federal Housing Administration Announces 2026 Loan Limits
2
Consumer Financial Protection Bureau. Can Anyone Take Out a Reverse Mortgage Loan
3
Consumer Financial Protection Bureau (CFPB). Reverse Mortgage Rights and Responsibilities
4
eCFR. 24 CFR Part 206 – Home Equity Conversion Mortgage Insurance
5
eCFR. 24 CFR 203.43b – Eligibility of Mortgages on Single-Family Condominium Units
6
U.S. Department of Housing and Urban Development. FHA to Lower Owner-Occupancy Requirement for Condo Projects
7
Federal Register. Project Approval for Single-Family Condominiums
8
U.S. Department of Housing and Urban Development (HUD). Condominium Project Approval and Processing Guide
9
FHA Connection. Condominiums – Processing – Help – FHA Connection Single Family
10
Consumer Advice – FTC. Reverse Mortgages
11
U.S. Department of Housing and Urban Development. Mortgagee Letter 2014-07 – Non-Borrowing Spouse Protections
12
Internal Revenue Service. For Senior Taxpayers
13
Consumer Financial Protection Bureau. What Happens if My Reverse Mortgage Loan Balance Grows Larger Than the Value of My Home
14
U.S. Department of Housing and Urban Development (HUD). FHA Condominium Approval Search
15
U.S. Department of Housing and Urban Development (HUD). HUD FHA Reverse Mortgage for Seniors (HECM)
16
Fannie Mae. Appraisal Report Forms and Exhibits