Condo vs PUD: No FHA Project Approval needed on PUDs

Real Estate Agent with Karen Parsons-Fiddler, Broker 949-510-2395 BRE# 01494165

I had a nice surprise yesterday. I wrote an offer with FHA financing on a townhouse for a young couple. I had checked the "denied" list of FHA developments in the area and had not seen it. It's a shorter list, so I usually use it before I take clients to see homes. Oops....didn't think to see if it was on the "withdrawn" list. Learned something about completeness. It was withdrawn. Panic!!! The couple's kids had already picked out their bedrooms.

But....determined to save this deal, I looked into it further. The reason the approval had been withdrawn was because it was a PUD (Planned Unit Development). Huh...I thought those were single family development, like retirement communities. So I kept researching. Turns out that townhouse developments can be incorporated as a PUD. They actual deed the land to the home buyer and then convey easement usage to the common areas. By owning the land and only having usage rights, home owners are protected from the legal liability of their neighbors. Really interesting. But the best part???? FHA doesn't have to approve the development!

Deal saved!!! Happy home buyers! And I learned something! Success Story!


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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker and Attorney Licensed in DC, MD, VA,

Very interesting. I had a lender tell me that a condo community of townhouses (attached in groups of 6 to 8) would not qualify for 203k financing because the townhouse was in a cluster of more than 4 units. After some research I was able to demonstrate to him that the townhouse communities were not covered by that restriction. Again, arcane, but so  useful. Thanks for sharing about the PUDs!

Mar 12, 2009 02:25 PM #1
Roland Carrillo, PhD - Mortgage Consultant
Cary, NC

Funny, I had this same thing happen recently.  I was asked about a townhome not being on the approved PUD list for FHA.... but of course it was because FHA has not required those approvals since 2003. 

Condo developments still require approval, and some projects have a hard time meeting the FHA or the Fannie Mae requirements. 

Mar 25, 2009 03:13 PM #2
Karen Fiddler, Broker/Owner
Karen Parsons-Fiddler, Broker 949-510-2395 - Mission Viejo, CA
Orange County & Lake Arrowhead, CA (949)510-2395

Hi Roland,

I have a couple of developments here which are really only going to appeal to FHA clients and they are just sitting because they won't pass the financial test for FHA. The HOA is in lawsuits. Yuck.


Mar 25, 2009 04:05 PM #3
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Karen Fiddler, Broker/Owner

Orange County & Lake Arrowhead, CA (949)510-2395
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