FHA single-unit condo approval lets you get an FHA-insured mortgage on one specific condominium unit even when the overall project has not been certified by HUD. The process is governed by 24 CFR 203.43b and Mortgagee Letter 2019-13, and your lender handles it one loan at a time by submitting Form HUD-9991 through the FHA Connection portal.1U.S. Department of Housing and Urban Development. Mortgagee Letter 2019-13 The trade-off for skipping full project certification is a stricter set of eligibility thresholds, most notably a tight cap on how many FHA loans a single building can hold.
What Single-Unit Approval Covers
Approval is tied to a particular FHA case number and transaction, not to the project as a whole. Your lender evaluates the project’s finances, insurance, and occupancy at the loan level, submits a questionnaire to HUD, and if approved, only that specific unit is cleared for FHA insurance. The next FHA buyer in the same building has to repeat the process.2HUD User. Project Approval for Single-Family Condominiums
This path exists for a common situation: the HOA board has no interest in pursuing full project certification, but a buyer or seller still needs FHA-eligible financing. It is not a workaround for buildings that HUD has already rejected, and it does not apply to project types the FHA excludes outright.
Eligibility Thresholds
Every threshold below has to be met at the time of application. Miss one and single-unit approval is off the table until the underlying condition changes.
Minimum Project Size
The condominium project must have at least five dwelling units. Smaller projects do not qualify.3Federal Register. Project Approval for Single-Family Condominiums
FHA Concentration Cap
No more than 10 percent of the total units in a project can carry active FHA-insured mortgages. For projects with fewer than 10 units, the cap is two FHA loans total.1U.S. Department of Housing and Urban Development. Mortgagee Letter 2019-13 In a 20-unit building, two existing FHA loans use up the whole allowance. This is the barrier that blocks the most deals, and there’s nothing you can do about it except wait for one of those loans to pay off or refinance out. Before ordering an appraisal, ask your lender to check HUD’s condominium database for the current count.4U.S. Department of Housing and Urban Development. Condominiums Help – FHA Connection
Owner-Occupancy Rate
At least 50 percent of the units must be occupied by owners or purchased by someone who intends to live there as a primary or secondary residence. Buildings dominated by investor-owned rentals will not qualify.5U.S. Department of Housing and Urban Development. Mortgagee Letter 2016-15
Commercial Space
No more than 35 percent of the project’s total floor area can be used for commercial or non-residential purposes, including retail storefronts, restaurants, and professional offices.3Federal Register. Project Approval for Single-Family Condominiums Mixed-use buildings in urban cores frequently run into this limit.
HOA Delinquencies
No more than 15 percent of the total units can be more than 30 days past due on HOA assessments. That count includes every unit regardless of whether it is owner-occupied, investor-owned, bank-owned, or vacant. HUD may grant an exception allowing up to 20 percent on a case-by-case basis.6U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide
No Prior HUD Rejection
The project cannot have a “withdrawn” or “rejected” status in HUD’s condominium database. A prior rejection for structural problems, financial instability, or regulatory violations blocks the single-unit path until the underlying issue is resolved.7U.S. Department of Housing and Urban Development. Condominiums List – Field Descriptions
Project Types That Are Never Eligible
Some condominium projects are ineligible for FHA insurance regardless of whether they meet the numerical thresholds. If your building falls into one of these categories, single-unit approval is not available:6U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide
- Condotels and any project managed or operated as a hotel or motel, including buildings with “hotel” or “motel” in the name and conversions of former lodging properties
- Timeshares and any segmented-ownership arrangement
- Multi-dwelling units, meaning condo units containing more than one separate living space
- Projects with mandatory rental pooling or that require owners to cede occupancy control to a management firm
- Houseboat projects
- Assisted living facilities with features such as mandatory purchase of care services
- Coastal barrier properties in designated areas along the Atlantic, Gulf of Mexico, or Great Lakes, as prohibited by the Coastal Barrier Resources Act
- Projects where the developer still owns common areas or amenities after transferring control to the HOA
Documentation Your Lender Will Need
Gathering the paperwork is the most time-consuming part of a single-unit approval, because it comes from the HOA or its management company. An unresponsive board can stall a deal for weeks. Experienced FHA lenders send the documentation request the same day they take your application.
HOA Budget and Reserves
The current year’s operating budget must show that at least 10 percent of the association’s total annual income is allocated to a replacement reserve fund for long-term capital projects like roof replacement, elevator repair, and structural maintenance.8U.S. Department of Housing and Urban Development. FHA Single-Unit Approval Condominium Required Documentation
Insurance Certificates
The HOA must carry adequate master property coverage at replacement cost, general liability, and flood insurance if the building sits in a designated flood zone. Fidelity insurance protecting the association’s funds from theft or mismanagement by board members or employees is also required.9U.S. Department of Housing and Urban Development. FHA Condominium Project Approval Required Documentation List
Governing Documents
The recorded covenants, conditions, and restrictions (CC&Rs), bylaws, and master deed are reviewed for two things: compliance with federal fair housing law and the absence of transfer restrictions that would prevent a borrower from freely selling the unit. A right of first refusal clause is permitted. Provisions that make a sale voidable, require third-party consent, or limit how much of the sale proceeds an owner can keep will disqualify the unit.6U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide
Litigation Disclosure
Pending litigation against the HOA does not automatically kill the deal. Routine foreclosure actions by a lender to take possession of a specific unit are excluded from the analysis entirely. For any other pending lawsuit, the association’s attorney needs to provide a written explanation covering the reason for the suit, the expected resolution date, whether insurance would cover a settlement without threatening the HOA’s finances, and whether the outcome could affect owners’ ability to transfer title. Lawsuits involving structural defects or disputes that could drain the reserve fund get the most scrutiny.6U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide
Form HUD-9991
All of the above funnels into Form HUD-9991, the FHA Condominium Loan Level/Single-Unit Approval Questionnaire.10U.S. Department of Housing and Urban Development. Form HUD-9991 It asks for specific data on insurance, occupancy, delinquency rates, litigation, and commercial space. Most of that data comes straight from the management company questionnaire and the governing documents. Your lender certifies the answers to the federal government, so accuracy matters.
How the Submission Works
You do not interact with HUD directly. Your lender logs into the FHA Connection portal, submits the HUD-9991 when requesting the FHA case number for the unit, and HUD staff reviews the file to confirm the project meets every eligibility requirement. If approved, HUD establishes a condominium project record for the unit if one does not already exist, and the mortgage can move to endorsement.4U.S. Department of Housing and Urban Development. Condominiums Help – FHA Connection
Timelines vary. A clean file with straightforward financials and no litigation may clear in a few business days. Files with delinquencies near the threshold, pending lawsuits requiring attorney explanations, or incomplete insurance documentation can take several weeks. The lender receives approval or denial through the same portal.
One shortcut worth knowing: if your transaction is an FHA-to-FHA streamline refinance or involves a HUD Real Estate Owned property, the HUD-9991 questionnaire is not required.4U.S. Department of Housing and Urban Development. Condominiums Help – FHA Connection
Why Applications Get Denied
Denials cluster around a handful of predictable causes.
The concentration cap is the most mechanical barrier and the hardest to work around, because it depends on other borrowers, not you. Check the FHA loan count in the building before spending money on the file.
Low owner-occupancy is next. Management companies sometimes count units inconsistently, so if the building is close to the 50 percent line, press for a unit-by-unit breakdown rather than accepting an estimate.
HOA delinquencies above 15 percent can sometimes be cured before closing if the board takes collection action or works out payment plans with delinquent owners. A building that fails today may qualify in a few weeks.
Incomplete documentation is the most frustrating cause of delay because it is entirely avoidable. A missing fidelity insurance certificate, an outdated budget, or a slow management company can push a closing back by weeks.
If single-unit approval is denied, your options are narrow: switch to a conventional loan, which does not require HUD project approval; find a different unit in an already FHA-approved project; or wait for the disqualifying condition to change. Full project approval would also open the door, but that decision rests with the HOA board.