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FHA condominiums that are “approved” by the Federal Housing Administration (FHA) are eligible for an FHA Home Loan. The FHA provides an easy to use condo lookup tool that lists the FHA approved condos. If the condo development is not on the approved list or the approval has expired, then the project will need to be approved or re-certified before an FHA loan can be obtained, or the buyer can seek a Single-unit approval.
Single-unit approval (previously named spot-loan approval)
On 10/15/2019 HUD officially implemented the Single Unit Approval process. It is now possible for borrowers to obtain FHA approval for single units within condominium complexes that are not FHA approved. To be eligible for Single-Unit Approval, the unit must be located in a project that is not FHA-approved, that is complete and available for occupancy, has at least five dwelling units and it is not a manufactured home. The project must also meet a subset of the requirements set forth for project approval, including FHA insurance concentration, owner-occupancy percentage, and financial condition of the project.
Single-unit approval requirements:
- The condominium project is not currently “Approved” or been previously rejected for an adverse determination.
- The condo must have a minimum of 50% owner-occupied units
- For condominium projects with 10 or more units, no more than 10% of individual condo units can be FHA-insured. Projects with fewer than 10 units may have no more than two FHA-insured units.
- Commercial space is limited to a maximum of 35%
- The condominium project must contain a minimum of five units
- Condominium project must meet all FHA Property Standards
- Manufactured homes are not eligible.
- The Single-unit approval process must be handled by a lender that employs Direct Endorsement Underwriters. Realtors, Condominium Associations, and Lenders without DE Underwriters are NOT allowed to apply directly for a SUA.
- The Condominium Association MUST still meet ALL eligibility requirements set forth for Full Project Approval.
The Condominium Association must complete the Condominium Questionnaire
The single-unit approval requirements are very similar to the Full Project approval.