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FHA home loans for condo units typically include 15-year or 30-year purchase loan terms and refinance loan terms for units in an FHA-approved condominium project. But loans can also be approved for individual condo units in a project that is not FHA approved. 

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

FHA Condo Loans in 2021

December 21, 2020

FHA Condo Loans in 2021
It’s easy to assume that all government backed home loans such as the FHA loan program are need-based and not intended for a wider consumer group. Some confuse the FHA loan program with the USDA loan program for single families; USDA single family home loans are need-based while FHA loans are not.

And because of issues like that, some are surprised to learn that you have the option of purchasing a condominium unit with an FHA mortgage. FHA home loan rules in HUD 4000.1 include options for purchasing condo units with FHA loans. FHA.gov explains that condo loans are offered under the authority of Section 203(b) of the National Housing Act.

FHA Condo Loan Requirements

The FHA can approve mortgages for “a one-family unit in a project coupled with an undivided interest in the common areas and facilities which serve the project.”

FHA home loans for condo units typically include 15-year or 30-year purchase loan terms and refinance loan terms for units in an FHA-approved condominium project. But loans can also be approved for individual condo units in a project that is not FHA approved. This is known as single-unit approval authority.

Such approval is conditional on the project overall meeting certain FHA loan requirements. The condo project must be completed and must “exist in full compliance with applicable state law requirements including good standing with the state, and with all other applicable laws and regulations.”

Single-Unit Condo Approval

For a condo unit to be declared eligible for Single-Unit Approval, “the unit must be located in a project that is not FHA-approved, that is complete and ready for occupancy, has at least five dwelling units and it is not a manufactured home.” 

FHA guidelines add that a condo project must meet certain requirements including “FHA insurance concentration, owner-occupancy percentage, and financial condition of the project.” Many of these rules simultaneously project the lender and the borrower; 

FHA loan rules include a requirement that the property to be secured by the FHA mortgage to have a “remaining economic life” for the duration of the mortgage. 

In other words, some FHA loan protections include efforts to make sure the condo unit maintains its value for the entire duration of the loan. FHA condo loans, like all FHA mortgages regardless of type, are for any financially qualified borrower. 

The same FICO score rules, low down payment requirements, and consumer-friendly features including no penalty for early payoff of the condo loan. Condo units are excellent choices for some borrowers; not everyone applying for an FHA mortgage wants a house in the suburbs!

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