What is an FHA-approved condo?


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Buying a home or condo with a conventional mortgage means you’ll need a 20 percent down payment, which is a hefty chunk of change. But potential homebuyers who can’t come up with that much cash have another option: a Federal Housing Administration (FHA) loan, which is administered by the government and requires as little as 3.5 percent down.

These low-down payment loans are usually done for single-family homes, but condominium mortgages are also eligible. Unfortunately, finding FHA-approved condos might not be so easy. However, a recent FHA rule change that went into effect Oct. 15, 2019, loosened restrictions, making it easier for more condos to meet eligibility requirements for an FHA loan. If you’re looking for this type of mortgage on a condo, learn what it is and what it means for you as a buyer.

What is an FHA-approved condo?

An FHA loan is insured by the Federal Housing Administration. They’re meant for first-time homebuyers and those who haven’t owned property in the last three years. An FHA-approved condo is a condominium that is eligible for FHA loans.

“This makes them an especially popular choice for condos, which attract lots of first-time buyers,” says Will Rodgers, real estate agent with eXp Realty in Virginia. “This is because they are usually the most affordable option.”

But not all condos offer buyers the chance at FHA loans. Some condo associations aren’t excited about attracting owners who need a lower down payment barrier to qualify. These associations may believe this means those owners are more likely to default.

What is the process of getting a condo FHA approved?

Condos that are looking to accept FHA loans have to go through an approval process and periodically get recertified. A condo project must be approved before FHA applications can be processed for individual units.

This year, HUD changed the recertification process to be every three years, rather than every two years. Along with that, under the new rules individual condo units can be eligible for FHA loans even if the full development isn’t FHA approved.

If condo associations were hesitant about FHA loans before, the update to the rules might entice them to be more open to FHA-approved condo offerings. There are more than 150,000 condominium projects in the country, but only 6.5 percent of them accept FHA loans, according to HUD.  Under the new rules, it is estimated that upwards of 60,000 more units could be eligible for FHA loans.

The approval process varies depending on the original structure requesting approval. For instance, older buildings might have a longer approval process than new projects.

Condo developments looking to get approved need to complete the HUD Review and Approval Process (HRAP) or Direct Endorsement Lender Review and Approval Process (DELRAP) for lenders.

Once a condo is approved through HRAP or DELRAP, they’ll get a condo ID used for the project as well as a submission number.

Pros and cons of FHA-approved condos


  • Higher applicant pool. HUD estimates that 84 percent of FHA-insured condo buyers have never owned a home before. This allows condominiums to keep open units to a minimum and increases the number of potential buyers who can be approved for mortgages.
  • Flexible terms for owners. FHA-approved condos offer the same flexibility that traditional homes do: low down payments, more lenient credit requirements, and the government owns the loan rather than a private lender.
  • More choices for potential buyers. The more FHA-approved condos there are, the more opportunities for families to own homes and build equity, rather than rent.


  • Mortgage insurance is required. Private mortgage insurance, or PMI, is required for FHA loans since they accept less than 20 percent of a down payment. This will increase the cost of your monthly payments.
  • Recertification is required. For condos, the recertification paperwork can be considerable even though the recertification process now occurs every three years instead of two.
  • Units still limited. “It’s important to know that it’s not open-ended in terms of the amount of FHA financing that can be done in a building,” says Esther Phillips, senior vice president of Key Mortgage Services in Chicago. “Only a certain number of condos can be FHA financed in a non-FHA approved building.”

FHA approval requirements for condos

Before you get started on buying an FHA-approved condo, make sure you know what condos need in order to qualify.

  • According to HUD, the property or project must be completed, which means if a project is still in the process of being built, it won’t qualify.
  • No more than 50 percent of units can be used as rentals or be investor-owned. This means you have to buy the unit and actually live in it.
  • The property must be insured and at least 10 percent of the HOA budget must be in a cash reserve.
  • No more than 35 percent of the property can be for commercial use.

Looking for an FHA-approved condo?

Before you find your dream condominium, you’ll want to check if it’s FHA approved first. You can browse the list of FHA approved condos on the Department of Housing and Urban Development (HUD) website. Here, you’ll see condos in your area that are FHA-approved.

Ashley Baskin, a licensed real estate agent and advisory board member for Home Life Digest, says you shouldn’t forget fees and condo requirements when conducting your research.

“Make sure you consider association fees, condo bylaws, cash reserves and amenities,” Baskin says. “Talk to a lender to learn more about the next steps. You will be looking for the lender who offers you the lowest interest rates.”

Keep in mind that you’ll want to follow similar steps that you would for searching for a traditional home loan, like:

  • Getting your credit score as high as you can before getting pre-approved
  • Saving for a down payment, even if you can only put down the 3.5 percent minimum
  • Buying only what you can afford

Also find a real estate agent who is well-versed not only in your future neighborhood, but one that’s familiar with FHA-approved condos.

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