How does a condo association get FHA approved?

By OurHOA · General information · Revised September 22, 2026

What HUD checks before a condo project goes on the FHA approved list, the three-year expiration boards forget, and the single-unit workaround.

Approval belongs to the project, not the unit

With FHA financing, the lender underwrites the whole condominium project before it will touch any individual unit in it. HUD keeps a public list of approved projects that anyone can search by name or location, and if your community is not on that list, a buyer using an FHA loan generally cannot close there. That matters more than boards expect, because FHA loans are how a lot of first-time and lower-down-payment buyers get into a condo at all. When the approval goes away, those buyers go with it, and the sellers in your community are left with a smaller pool bidding on their units. This is a cousin of the warrantable versus non-warrantable question covered in our guide on that topic, but FHA runs its own list and its own rules, and being fine with Fannie Mae does not put you on it.

What HUD actually checks

The eligibility tests are mostly financial and mostly things a board already controls. At least half the units generally have to be owner-occupied, though HUD allows a lower share for established projects with strong finances and few arrears. No more than 15 percent of units can be 60 or more days behind on assessments. The budget has to put at least 10 percent of assessments toward reserves. No single person or entity can own more than 10 percent of the units. Commercial and other non-residential space is capped at 35 percent of the project's floor area, with room for exceptions. On top of that, HUD wants adequate master insurance and a fidelity bond where applicable, and no pending litigation that threatens the association's solvency.

Two review paths, one document packet

An application can go through HUD staff directly, which the program calls HRAP, or through an FHA-approved lender that has authority to review projects itself, known as DELRAP. Either way the association is the one that has to produce the paperwork: recorded governing documents, the current budget, the reserve study, insurance certificates and the fidelity bond, a delinquency report as of a recent date, and a signed statement about litigation. Most associations hand the assembly off to their manager or their attorney, since the packet is finicky and an incomplete submission just comes back. HUD publishes the required documentation list, so it is worth pulling it before anyone starts collecting files.

The three-year clock nobody watches

Approval expires three years after the project is placed on the list, and HUD does not send a reminder. The recertification review can be submitted no earlier than six months before that expiration date and no later than six months after it. Miss that back end and the project is not renewing anything, it is starting the full application over. This is how a community that was approved for a decade quietly falls off the list: the board that did the original filing turned over, nobody inherited the date, and the first anyone hears about it is a buyer's lender killing a contract in escrow. Put the expiration on the board calendar the day approval comes through.

Single-unit approval when the project is not approved

There is a narrower route for a buyer whose project is not on the list. Single-unit approval lets a lender get one specific unit cleared, provided the project is complete, has at least five units, and is not manufactured housing. The catch is a concentration cap: FHA-insured mortgages are limited to 10 percent of units in a project with ten or more units, and to two units in a project with fewer than ten. So it rescues an individual sale, and it is genuinely useful for the owner in escrow, but it does nothing structural for the community. Once the cap fills, the next FHA buyer is out of luck again.

The two numbers that decide it

In practice most associations fail on delinquencies or on the reserve line, and both are budget-season decisions rather than paperwork problems. Say you have 60 units: nine owners sitting 60 days past due puts you at the edge of the 15 percent limit, so a collection policy that actually gets enforced in month two instead of month eight is what keeps a project eligible. Same story with reserves, where trimming the reserve contribution to hold dues flat is the move that looks responsible in November and disqualifies you in March. Keep a current delinquency report, the reserve study, and the insurance certificates somewhere the whole board can reach, because those are the same three documents lenders ask for all year. HUD's rules change from time to time and this is background rather than advice, so confirm the current standards with an FHA-approved lender or association counsel before you file.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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