Mortgage and Lending with First Meridian Mortgage


New FHA Condo Approval Rules!


Realtors who are serious about their business must be aware of these new guidelines!!


In 2010, not to offer FHA financing on a condominium is in effect eliminating a huge chunk of buyers.  In today's tough mortgage and Real Estate environment you must expose the property to all possible buyers.

Lots of condo's serve the first time homebuyers.  FHA is Crucial.


FHA allows for 3.5% down payment.  Conventional programs require a minimum of 10% but in some areas 25% down payments

FHA will allow for lower credit scores.


FHA came out with new guidelines on Condo Approvals. We have had notice about this already in the end of 2009 but for the most part they went into effect 2/2/10.  There used to be an approved list of approved condo’s on the HUD website. If a condominium complex was approved, then we could do an FHA loan. If a condominium complex was not approved, we were also able to do “spot approvals”.  Spot approvals are individual approvals of a condo within a non-approved condominium complex.


Now the spot approval has been done away with and we have to check with the FHA to see which condo complexes are on their new list. A little note, a lot of condo’s that were on the FHA approved lists are no longer because an existing approved condo complex has to have been approved prior to October 2008 in to be on the new approved condo list on FHA connection. All others have to go through a complete condo complex approval process.


What that means is that no longer can we rely on closing an FHA mortgage on a condo quickly. An FHA case # cannot be issued until the complex is approved which means appraisals can’t be ordered.


What FHA has done, is simplify the approval process for condo complexes. There are 2 ways of approving a complex.  DELRAPs or HRAPs.  DELRAP means that an FHA approved lender’s DE underwriter will go through the documentation and issue a condo approval.  This is the condo complex approval, not just this one unit. This is unfortunately impractical for the most part, since if HUD later on determines that there was any error in this approval, that Lender is responsible for every condo that closed based on this bank’s DELRAP approval, even if it closed with a different lender and no bank wants that responsibility.


HRAP is the same approval, but HUD issues the approval.


Once the documentation is compiled, it needs to be submitted to HUD.  It takes HUD now about 4-6 weeks turn around time to approve the condo.  They will be flooded with applications, so it can take longer.  Some areas to be concerned about:


Who will pay for the company that facilitates the condo complex approval?


If a condominium project is in litigation, beware. Any lawsuit would pretty much disqualify a condo association (even if the association is the plaintiff) since they argue that any lawsuit could financially drain the budgets of the associations.


All existing FHA approved condominiums that were approved before 10/2008, the HUD approval will expire on 12/7/2010, When listing a condo, encourage your homeowner's and the Homeowner associations to begin the application process early, I would suggest as early as May/2010.


Here are the NEW changes:


  1. Elimination of Spot Approvals
  2. Condo Complexes need to re-certify every 2 years
  3. Max  FHA financing in 50%. After 12/10/10, 30%
  4. No more than 15% of homeowners can be in arrears
  5. No more than 10% owned by one investor
  6. 2-3 unit condos now are allowed (Used to be only 4+ units allowed)
  7. Right of first refusal allowed on a case by case basis
  8. 30% pre-sale required on New construction. 50% after 12/31/10.
  9. No more 1 year waiting period on a conversion


Once a condo project is approved, with each individual mortgage application a new  condo questionnaire must be filled out.  HUD is making sure that the condo complex fits the following basic criteria: 


  1. FHA Concentration 50%, and up to (100% on a case by case basis)
  2. Investor concentration, 10%
  3. Homeowners delinquency not greater than 15%
  4. Owner occupancy requirements, 50% min and can exclude REO's from calculation


If homeowner's are delinquent, the reserves will be low.  If too many investors or renters are in the complex, it will be up-kept at a lesser degree than if Owner Occupants live there and they also don't want to much exposure in any development.

What HUD is trying to do is eliminate poorly manged projects.

Here are some handy links:


To find out if a condominium project is HUD approved visit:

To access Mortgage Letter 2009-46A:

To access Mortgage Letter 2009-46B:

For general FHA information:


CONDO ACTION PLAN(Approved Condo’s)


CONDO ACTION PLAN (NON Approved Condo’s)






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jj McColgan

Great info on the FHA condo process. I sent it to several Realtors

Jun 25, 2010 08:55 AM #1
pamela mammarello

i am currently trying to buy a condo in rochester ny that is not on the approved list..i do qualify for a fha mortgage and only a fha mortgage..what can i do..i put in the offer nw i need to get this on the list asap...please help

Dec 04, 2010 07:23 AM #2
ReadySetLoan Condo Approval Team
ReadySetLoan Condo Team LLC - South Windsor, CT
The FHA/VA Condo Project Approval Specialists

Excellent article!  Few Realtors are on top of this but you certainly are one of them.

Mar 16, 2011 12:35 AM #3

What is the maximum percentage allowed for leased units in an FYA approved condo project?  We have some saying 30% and others 50%.

Please clarify.  Thank you!

Apr 05, 2011 11:03 AM #4
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