May 28, 2020

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FHA Condo Loans: New Requirements

2015-24The FHA official site has updated owner/occupier requirements for FHA condo loans.

In a press release issued in late October, the agency announced changes effective immediately; “The Federal Housing Administration (FHA) today announced that, under certain circumstances, it will lower its required owner-occupancy standard for approved condominium developments…FHA currently requires that approved condominium developments have a minimum of 50 percent of the units occupied by owners.”

The press release adds that “this requirement can be lowered to 35 percent for existing condo developments provided the project meets certain conditions.”

The press release states that The Housing Opportunity through Modernization Act of 2016 (HOTMA) included instructions to the FHA, “to issue guidance regarding the percentage of units within an approved condominium development that must be owner-occupied. While having too few owner-occupants can detract from the viability of a project, requiring too many can harm its marketability.”

The press release says owner-occupants serve to “stabilize the financial viability of the projects and are less likely to default on their obligations to homeowner associations than non-owner occupants”, hence these changes in policy for FHA condo loans.

What is different? From the FHA/HUD official site:

“For existing condominium developments greater than 12 months old, FHA will lower the owner-occupancy requirement to as low as 35 percent under the following conditions:

-Applications must be submitted for processing and review under the HUD Review and Approval Process (HRAP) option;

-Financial documents must provide for funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 20 percent of the condo development’s budget;

-No more than 10 percent of the total units can be in arrears (more than 60 days past due) on their condominium association fee payments; and

-Three years of acceptable financial documents must be provided.”

For condo projects that are proposed construction or are considered under construction to include “existing projects less than 12 months old” or are considered “gut rehab conversions” the press release states that the FHA will “maintain its current owner-occupancy percentage of 30 percent”.

Joe Wallace - Staff Writer

By Joe Wallace

November 1, 2016

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 for (8) years and is currently the Associate Editor for

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About was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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