FHA Condo Approval Rules Changing

Is it possible to get an FHA loan for a condominium?

Yes, it is possible — but if you have tried getting an FHA loan for a condominium recently, you are most likely aware that many complexes are not approved by the U.S. Department of Housing and Urban Development for FHA financing.

Under Federal Housing Administration rules, an individual condominium unit isn’t available for FHA financing unless the entire development has been through the FHA certification process.

Many condominium homeowner associations, however, have decided to forgo FHA certification because there were too many potential legal liabilities and rules regarding unit ownership and residential/commercial usage. Penalties for violating these rules could be as high as $1 million in fines and possible prison time in the case of misinformation in the application or certification process.

But now there’s good news: The FHA recently announced temporary changes in some of the rules for a condominium complex to become FHA certified. Among the noteworthy changes:

  • No more than 15 percent of a development’s units can be more than 60 days delinquent on condo association dues. The previous rule was 30 days.
  • Mixed-use developments (residential, retail, commercial real estate) may seek FHA certification provided that the commercial interests don’t harm the building’s residential component.

The changes are effective immediately, and more modifications are expected in the future.

If you have been frustrated while shopping for condos because so few of them allow FHA financing, this announcement could bode in your favor; in the not-too-distant future, a much larger percentage of condominiums likely will be approved for FHA financing.


Justin McHood is America’s Mortgage Commentator and lives in the Phoenix, Arizona area. You can find Justin on Facebook, Twitter, and LinkedIn. He is happy to answer any mortgage-related questions that you may have.

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.