May 25, 2022
Are you looking for an FHA condo loan with a low down payment? Are you having trouble finding a condo project on the FHA-approved list, even with a lender’s help? There may be options for you thanks to the ability to apply for single condo unit approval from the FHA.
At one time, FHA loan rules required condo projects to be on or added to an FHA-approved list before they could be considered for an FHA mortgage.
But the rules were updated, and it’s possible today to apply for an FHA condo loan for a unit that’s not part of an approved condo project — that unit may still be eligible for an FHA mortgage.
This is accomplished via the FHA Single-Unit Approval process which, according to an FHA Mortgagee Letter issued in 2019, includes the following permissions for single condo unit approval. These rules apply, according to the FHA, in the following circumstances::
- A condominium project that did not go through the FHA approval process, or
- An established condominium project that was previously approved but is now expired, rejected, or withdrawn.
Not all condo units can be approved. The general guideline is that the project must have five units or more and be ready for occupancy. FHA loan rules say the condo cannot be a manufactured home, and there is a “maximum FHA concentration” for the project.
That means that for a condo project that has less than ten units, the maximum number of FHA loans possible in that project is two.
How does it work? Your loan officer will submit HUD Form 9991, a Condo Loan Single Unit Questionnaire which is reviewed by HUD. This paperwork is required only for FHA condo purchase loans. If you are refinancing an existing FHA mortgage with an FHA Streamline loan the form is not required.
How do you tell if your condo unit needs this type of approval? When you find a condominium project you want to buy into, you can have your participating FHA lender search for the project in the FHA-approved list.
It may not be necessary to apply for condo unit approval if the project has already been approved by the FHA.
You can also search for the project yourself at the HUD official site. They are searchable by name, location, and status. The projects listed in this database are for sale by private sellers and are not offered for sale by the FHA or HUD.
FHA condo loans are similar to other FHA loans in that the down payment requirements, FHA FICO score ranges for loan approval, and mortgage insurance requirements are identical to other home loans.
The approval process is not so typical compared to other FHA mortgages, but it’s not an impossible hurdle to clear, so to speak, on the way toward FHA condo loan approval.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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