FHA Condo Approval Requirements: Documents, Submission, and Renewal

An FHA condo approval lets buyers in a condominium project use FHA-insured mortgages, with down payments as low as 3.5 percent, to purchase a unit. To qualify, the project has to meet HUD’s requirements on owner occupancy, association finances, insurance, commercial-space share, and legal documents, then submit a full application either directly to HUD or through a qualified Direct Endorsement lender. Approval lasts two years and has to be renewed. Below is what the association, its board, or a lender needs to have in place before an application will clear.

What the Project Itself Has to Look Like

The baseline rules sit in 24 CFR 203.43b. The project must be primarily residential, made up entirely of one-family units, and in compliance with all applicable federal, state, and local zoning, fair housing, and accessibility laws.¹ From there, HUD layers on specific numerical thresholds.

Owner Occupancy

At least 50 percent of the units in an established project must be owner-occupied rather than rented. For proposed projects, buildings still under construction, and developments less than 12 months old, the threshold is 30 percent. Once the project passes its first anniversary, the 50 percent rule applies.²³

FHA Concentration Cap

No more than 50 percent of units in an approved project can carry FHA-insured mortgages at the same time.³ If the project is already at that ceiling, additional FHA buyers have to wait for the ratio to drop.

Commercial Space

Non-residential floor area cannot exceed 35 percent of the project’s total square footage. HUD can grant case-by-case exceptions up to 49 percent.¹ Mixed-use buildings with ground-floor retail often push against this limit.

Delinquencies and Reserves

No more than 15 percent of units can be more than 60 days behind on association assessments. The association also has to fund its reserve account with at least 10 percent of the total monthly assessments collected across all units, unless a reserve study done within the prior 24 months supports a lower figure.⁴ Underfunded reserves tend to lead to special assessments, which in turn drive up delinquency, so HUD treats the two numbers as connected.

Insurance

Every project has to carry hazard insurance on the building, general liability insurance, and fidelity (employee dishonesty) coverage.⁵ For projects with more than 20 units, the fidelity bond must cover at least three months of aggregate assessments on all units plus the total balance held in reserve accounts. If a management company handles association funds, that company must carry its own fidelity coverage.² Fidelity is where boards most often fall short.

The Right-of-First-Refusal Problem

One clause in the CC&Rs disqualifies more projects than any other financial metric: a right of first refusal letting the association buy a unit ahead of an outside purchaser. HUD treats it as a restriction on an owner’s ability to freely transfer title. Waiving it for a single sale is not enough. The clause has to be removed from the governing documents entirely before the project can qualify.

Documents the Association Has to Produce

HUD publishes a formal checklist covering every document that has to be in the package.⁵ At a minimum, the association has to submit:

Recorded CC&Rs, master deed, all amendments, and signed and adopted bylaws.
The current year’s board-approved budget and evidence of adequate reserve funding.
Certificates showing hazard, liability, and fidelity coverage that meets HUD’s minimums.
A signed and dated attorney letter describing any pending litigation, the anticipated resolution, whether insurance would cover a potential judgment, and whether the case could affect the association’s solvency or an owner’s ability to transfer title.²

Pending litigation does not automatically disqualify a project. Routine foreclosure actions against individual unit owners are excluded. Lawsuits that threaten the association’s finances or owners’ property rights, on the other hand, get serious scrutiny.

Note that HUD Form 9991, the “FHA Condominium Loan Level/Single-Unit Approval Questionnaire,” is not the project application. Lenders use it at the individual loan level.⁶ The project package is built from the documentation checklist and the applicable HUD appendix.

How to Submit: HRAP or DELRAP

There are two ways to route the application. Both require the same documents.

Under the HUD Review and Approval Process (HRAP), the package goes to an FHA Homeownership Center and government staff handle the review. HUD’s stated processing target is 30 calendar days from receipt of a complete package.⁷ Incomplete submissions or heavy volume push that out. HRAP is the only pathway for certain project types, including those with rent-stabilized or affordable housing units and projects seeking reduced owner-occupancy thresholds.

Under the Direct Endorsement Lender Review and Approval Process (DELRAP), a qualified DE lender performs the review on HUD’s behalf. The advantage is speed: the lender controls the timeline. The risk is that FHA can withdraw a DELRAP approval later if it finds the lender’s review was deficient.⁸

Extra Rules for New Construction

Projects that are proposed, under construction, or less than 12 months old face additional hurdles. At least 30 percent of total units must be pre-sold before HUD will endorse a mortgage on any unit. Pre-sales can be shown through purchase agreements with loan commitments, closed and occupied units, or a developer certification listing sold, under-contract, and closed units. The presale requirement does not apply to existing projects or non-gut rehabilitation conversions.²

A final certificate of occupancy must be in hand and all common areas and amenities must be complete. Legal phasing is allowed. For vertical buildings, floors must be phased in groups of at least five consecutive residential floors, with a temporary certificate of occupancy and a third-party completion bond in place. HUD does not accept market phasing as a substitute, and occupancy and concentration percentages for multi-phase projects are calculated cumulatively across all declared phases.²

When Full Project Approval Isn’t an Option: Single-Unit Approval

Since 2019, FHA has offered a single-unit approval path for buyers in projects that lack project-wide approval.⁹ The project has to contain at least five dwelling units, be complete and ready for occupancy, and cannot be a manufactured-home community.¹⁰ Cooperatives are not eligible.¹¹

Concentration limits are tighter than for full approval. In projects with 10 or more units, no more than 10 percent of units can carry FHA-insured mortgages. In projects with fewer than 10 units, only two FHA-insured units are permitted.⁹ That makes single-unit approval a narrow tool: in a 20-unit building, only two FHA loans can exist at once through this pathway.

The lender requests a case number through FHA Connection, selecting “Single-Unit Approval” from the site/condo field, then emails the required documentation to the FHA Resource Center. The lender certifies that the unit and the surrounding project meet FHA’s financial and safety standards, and Form HUD-9991 is completed to verify loan-level and single-unit requirements.⁶

Approval Expires After Two Years

FHA project approval expires two years from the date the project is placed on the approved condominium list.² The recertification window opens six months before expiration and stays open until six months after, giving the board a 12-month span to act. Recertification requires updated financials and confirmation that the project still meets occupancy, delinquency, insurance, and reserve standards, along with disclosure of any material changes during the approval term. Both HRAP and DELRAP handle recertifications.

If approval does lapse, HUD will not issue new FHA case numbers for units in the project until recertification or a new approval is completed. Existing FHA borrowers, however, remain eligible for FHA-to-FHA streamline refinances even after approval has expired.² Purchase activity, though, freezes until the paperwork catches up.

1
eCFR. 24 CFR 203.43b – Eligibility of Mortgages on Single-Family Condominium Units
2
U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide
3
HUD Archives. FHA Issues New Condominium Approval Rule
4
Federal Register. Project Approval for Single-Family Condominiums
5
U.S. Department of Housing and Urban Development. FHA Condominium Project Approval Required Documentation List
6
U.S. Department of Housing and Urban Development. Form HUD-9991 – FHA Condominium Loan Level/Single-Unit Approval Questionnaire
7
U.S. Department of Housing and Urban Development. How Do I Submit a Condominium Project to HUD for Approval
8
eCFR. 24 CFR 203.8 – Approval of Mortgagees for Direct Endorsement
9
U.S. Department of Housing and Urban Development. Mortgagee Letter 2019-13
10
Federal Register. Project Approval for Single-Family Condominiums
11
U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook 4000.1