The Department of Housing and Urban Development official site announced new FHA condo loan rules in August 2019 that make it easier to purchase a condo unit, especially for condo projects not added to the FHA approved list.
- The individual condominium unit must be located in a completed project that is not FHA-approved;
- Condo projects that have 10 or more units are limited to 10% FHA-approved;
- Condo projects not on the FHA approved list with fewer than 10 units “may have no more than two FHA-insured units.”
New FHA Condo Loan Rules On Minimum Owner-Occupancy Requirements
According to the HUD official site, “FHA will require that approved condominium projects have a minimum of 50 percent of the units occupied by owners for most projects.” and furthermore, the FHA, “FHA will only insure up to 50 percent of the total number of units in an approved condominium project.”
FHA Condo Loan Rules: Commercial/Nonresidential Space Limits
Starting October 15, 2019, FHA loan rules in HUD 4000.1 require “the commercial/non-residential space within an approved condominium project not exceed 35 percent of the project’s total floor area.”
In general, condo approval for FHA home loans means the unit and/or the project (depending on circumstances) must meet a set of FHA/HUD-set criteria including, but not necessarily limited to, the following:
- The condo is primarily residential in nature;
- The condo project is made up of single-family units;
- The condo project is compliant with code, local laws, local approval requirements, etc
- The project must be “complete and ready for occupancy, and not subject to further rehabilitation, construction, phasing, or annexation”. Certain exceptions may apply where phasing is concerned depending on circumstances.
If you are not sure how these rules may apply to your FHA condo loan transaction, discuss your concerns with the loan officer and discuss the timing of your condo loan where applicable.
The new rule changes do not alter basic FHA home loan requirements such as FICO scores, employment history, debt-to-income ratios or other loan approval aspects that are credit or income related.
Ask a lender about FHA condo loans and how the approval process works. Condo loans are definitely an option for all financially qualified FHA loan applicants, and you don’t have to be a first-time home buyer or have a financial need to qualify.