Here’s what you need to know about FHA-approved condos, including how and where to find them.
The process for finding FHA-approved condos is simple. Input your desired state and county into HUD’s FHA-approved condominium search tool. From there, you’ll see a list of all the condo communities in the area that have already gone through the approval process.
If you don’t see your desired condo community on the list, reach out to the association to ask whether their building is eligible and if the FHA approval process has already been started.
An “FHA-approved condo” refers to any condominium unit that has been financed by a loan backed by the Federal Housing Administration (FHA). The condo unit must meet FHA appraisal standards to be approved for an FHA loan, among other requirements (that we explain more below).
Before 2019, the entire condominium complex had to be approved for even one of its units to qualify for FHA financing. Today, individual units can still receive approval, regardless of whether the entire complex is FHA-approved.
Since FHA-financed condos are insured by federal funds, HUD strives to reduce the risk of default on these loans. In particular, the agency sets certain requirements to help ensure that the resale value of these condos won’t decrease over time.
As a result, condominium units need to go through one of two approval processes to ensure that their value is sustainable. These processes are known as the HUD Review and Approval Process (HRAP) and the Direct Endorsement Lender Review and Approval Process (DELRAP). DELRAP is reserved for lenders who are trained in HUD’s approval process and have been given the authority to act independently.
Once approved through either method, the condo is given a unique condo ID number and submission number. These steps signify that the community can accept FHA loans.
If a condo unit isn’t currently FHA-approved, interested borrowers have the right to initiate the approval process. Keep in mind, however, that receiving FHA approval for a condo unit or community is more complicated than getting approval for a single-family home.
In addition to imposing the standard FHA approval requirements, HUD also sets expectations for the viability of the condo community as a whole, since the community’s health also affects property values.
Here’s a closer look at what will be evaluated during the approval process:
Buying an FHA-approved condo has its benefits and drawbacks, much like any other financial decision. Here’s what you may want to consider as you weigh your options:
| Pros | Cons |
|---|---|
| Lower minimum credit score requirements: It’s possible to be approved for an FHA loan with a 500 credit score. Other loan programs may require a 620 score or higher.
Smaller down payment requirement: At just 3.5%, FHA’s down payment requirement is smaller than some other loan programs. Less effort to maintain: With a condo, you aren’t responsible for maintaining the building’s exterior. In addition, the upkeep and repair of some mechanicals could be taken care of by your condo association. More amenities: Many condos come with amenities that you may not find with a single-family home, like a pool, gym, business center or community room. |
Two types of mortgage insurance: FHA loans require you to pay two different types of mortgage insurance.
Limited options: Since not every condo community is FHA-approved, you may have fewer options than you might with another loan type. Condo fees: While condos come with less responsibility for maintenance and upkeep, they also come with recurring fees that you’ll need to pay in exchange for any services provided by your condo association. More rules and regulations: You’ll have less autonomy than you would living in a single-family home. Condo rules may dictate things like whether you can have pets or when you can access certain common areas. |
