What Types of Condominiums Does FHA Accept?

What Types of Condominiums Does FHA Accept?

In response to notifying an inquiry that her condominium project is not approvable, she asked me “what types of condominium projects does FHA accept?”

This question was really in reference to the types of condominiums and not to something specific such as structure of the project’s budget.

The answer to this is better expressed in the manner of what types of condominium projects are not approvable with FHA?  The main types of condominiums that are not acceptable include:

·       Timeshare condominiums, where a unit has multiple owners who share designated times in the unit during the course of a calendar year.  These projects are most common in resort areas and typically have a check-in office and cleaning service, much like a hotel.  This is also known as segmented ownership.

·        House boat condominium projects.  I think this one is self-explanatory.  

·        Multi-unit condominium projects.  This one is typically the most confusing.  This is referring to when a condominium unit contains multiple dwellings.  I have only seen this once, several years ago in Hartford, CT.  The unit owners own two-unit condominiums where many live in one side and rent the other.  Both dwellings convey on the same deed.

·        Hotel condominiums/”Condotels”.  These are also very common in resort communities.  This is where the units are deeded as condominiums and purchased by individual owners.  However, the units can be leased to transients for short-term stays (as few as 1 day), have a front office for check-in and have a cleaning service.

·        Projects not primarily deemed as residential.  Some projects have both commercial and residential elements to them.  Those that are primarily non-residential are not eligible for FHA.

·        Projects with more than 25% of the floor area designated to non-residential space.  These projects are residential but also have non-residential units.  This also includes “live/work units”.  No more than 25% of the live/work unit can be designated for non-residential space and the total floor area of the non-residential space cannot exceed 25% of the total floor area of the entire project.

·        Projects that are located within a designated “coastal barrier”.

·        Projects where the developer retains ownership to the common elements are also not allowed.

·        Assisted living facilities are generally not acceptable and are reviewed on a case-by-case basis.

Aside from those mentioned above, nearly everything else has an opportunity to be approved with FHA, including projects with as few as two units.

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