FHA Condo Approvals – The Basics

Services for Real Estate Pros with ReadySetLoan Condo Team LLC

FHA Condo Approvals – The BasicsFHA Condo approvals the basics

Following a post from earlier this week, I was asked about the basics for FHA condo project approvals.  Last month, I attended a training administered by HUD on this very topic.  The training lasted all day and the information was considered “the basics” so please excuse my lack of details here.

The guidelines for FHA condo project approval can be found in the attachment to Mortgagee Letter 11-22 called the Condominium Project Approval and Processing Guide, or the “Guide” for short.  Some of these guidelines were updated via Mortgagee Letter 12-18.

This is a [very] brief overview of the requirements for FHA condominium project approval.  I have included links to other articles that provide more details.

Legal Documents

FHA requires copies of all recorded legal documents pertaining to the project.  This includes the Articles of Organization (or Incorporation), the Declaration, By-laws, all Amendments, site plans/plat map and building plans.

Watch out for Leasing Restrictions, Right of First Refusal and unit boundaries/insurance coverage.  For projects with 5 or more units, FHA requires that the HOA pay for insurance for the exterior of the units.

Financial Documents

FHA requests copies of the current operating budget, last fiscal year’s income/expense statement and a balance sheet dated within 90 days of submission.  A detailed description can be found in this article.

Flood Map

A FEMA flood map must be provided to verify whether or not the project resides in a Special Flood Hazard Area and, if it does, it has the proper flood insurance.


A certificate of all insurance policies must be provided.  FHA will verify that the hazard insurance includes building replacement cost coverage.  If the project is more than 20 units, a crime policy – typically called “Employee Dishonesty” – must be included.  The coverage of this policy must be equal to or greater than the total of 3 months’ aggregate common charges plus the amount held in the reserve account(s).

Property Management Agreement

If the project employs a property management company, a copy of the signed agreement must be provided.

Cover Letter

Appendix E-1, E-2 and E-3 of the Guide are Cover Letters.  The appropriate one must be supplied with every submission.  Hard, signed copies are required.  These documents convey much of the material facts about the project.

Appendix A: Project Certification

Mortgagee Letter 12-18 made obsolete the Appendix A located in the Guide.  A revised Appendix A was included in ML12-18.  It must be printed on the letterhead of the person who signs it.

Special Assessment/Loan Documentation

If the project has a pending or upcoming special assessment, certain information is requested by FHA regarding the reasons behind the assessment and its potential effects on the salability of the units.

If the HOA has an outstanding loan, additional information is required by FHA regarding the circumstances and debt load of the loan.

Pending Litigation

It is generally thought that pending litigation is the “nail in the coffin” for an FHA project approval but this is hardly the case.  FHA wants to know the details of the litigation and whether or not there is proper insurance in place to cover the Complaint.  The staff at the Philadelphia Homeownership Center could only think of one case that a slip-and-fall case resulted in a Rejection, and it was an extreme case. [A professional dancer suffered a career-ending injury and was suing the HOA for $10 million or so.  Obviously, the HOA’s liability insurance wouldn’t cover a claim so high.]

I know that this only scratches the surface.  If you have more detailed questions about any of these, please feel free to contact me. 

Image courtesy of Stuart Miles/freedigitalphotos.net

Posted by

The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA.  We have assisted nearly 200 condominiums and we can help your association.


ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.


Please contact us with any questions regarding FHA or VA condominium project approvals.  You can email me at askeric@readysetloan.com or call me at 404-433-4565. I will be happy to answer any of your questions.


FHA/VA Condo Approval Specialist

404-433-4565 Cell Phone

860-644-3772 Fax Phone

ready set loan condo team


 CAI-CT logo

 Check out our article in Common Interest magazine on page 19!

Find Eric Boucher with ReadySetLoan Condo Team on Google+


Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. David Popoff 02/28/2014 11:34 PM
  2. Maggie O'Connell 03/01/2014 09:16 PM
ActiveRain Community
The Lounge at Active Rain
Mortgage Solutions
Lead Generation
Addicted to Active Rain
basic requirements
hud condo
fha condo approval

Post a Comment
Spam prevention
Spam prevention
Show All Comments
David Popoff
DMK Real Estate - Darien, CT
Realtor®,SRS, Green ~ Fairfield County, Ct
Eric, great information, passing along to my clients. Bookmarked.
Feb 28, 2014 11:26 PM #1
Chris Griffith
Downing-Frye Realty, Bonita Springs, FL - Bonita Springs, FL
Bonita Springs Listing Agent

Eric,  I'm curious how common FHA financing is with condos.  We're pretty cash heavy here so I know there isn't a lot I have to deal with where financing, especially financing condos FHA is concerned.

Mar 01, 2014 10:08 AM #2
ReadySetLoan Condo Approval Team
ReadySetLoan Condo Team LLC - South Windsor, CT
The FHA/VA Condo Project Approval Specialists

Thank you very much, David.  I am honored.

Chris - as with anything having to do with real estate, it is localized.  Not only does the town matter, the projects vary within the towns.  Typically, projects with lower price points attract investors so use of FHA loans is relatively low.  However in certain towns and projects where the price point is in the $100-250k range, use of FHA loans is relatively high, sometimes as high as 40-50%.  In Bristol, CT, for example, the average FHA concentration in FHA-approved projects is around 20%.  In Glastonbury (a far more expensive town in which to live), the FHA concentration is below 10%.

Mar 01, 2014 10:46 PM #3
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?


ReadySetLoan Condo Approval Team

The FHA/VA Condo Project Approval Specialists
Contact me for a FREE Prequalification of your Condo Project
Spam prevention

Additional Information