To demonstrate Financial Stability, FHA requires ALL Condominium Projects to have financial documents that itemize and address income and expenditures that are sufficient and pertinent to the Condominium Project including:
- an operating income that demonstrates a stable income stream over the past two years with decreases of no higher than 15 percent;
- ability to cover the cost of insurance coverage and deductibles;
- a reserve account for capital expenditures and deferred maintenance that is funded with at least 10 percent of the aggregate monthly Unit assessments, unless a lower amount is deemed sufficient based upon an acceptable reserve study;
- evidence that the budget provides for the periodic funding to maintain the reserve account balance of at least 10 percent of the aggregate monthly Unit assessments, unless a lower amount is deemed sufficient based upon an acceptable reserve study;
- evidence that no more than 15 percent of the total Units are Units in Arrears (does not include late fees or other administrative expenses); and
- financial records that are consistent with the application package, including special assessments, loans, or other financial variations.
- be 36 months old or fewer;
- include a site visit;
- demonstrate that the Condominium Project has adequate funded reserves that provide financial protection for the Condominium Project equivalent to the reserve requirements;
- demonstrate that the Condominium Project’s funded reserves meet or exceed the recommendations included in the reserve study; and
- be prepared by an independent third party that has demonstrated knowledge of, and experience completing, reserve studies.
For case numbers assigned prior to October 15, 2019, information is available in:
- Mortgagee Letter (ML) 2011-22 Condominium Approval Process for Single Family Housing – Consolidation and Update of Approval Requirements and the attached Condominium Project Approval and Processing Guide provides the requirements and procedures for obtaining FHA condominium project approval.
- ML 2012-18 Temporary Approval Provisions for FHA Condominium Project Approval provides temporary condominium project approval guideline changes to address current housing market conditions.
- ML 2015-27 Additional Temporary Approval Provisions for FHA Condominium Project Approval
- ML 2016-15 FHA Condominium Project Approval – Owner Occupancy Requirements modifies the Condominium Project Approval and Processing Guide, attachment to ML 2011-22, in order to implement the Housing Opportunity Through Modernization Act of 2016 (HOTMA) requirements and establish the required owner-occupancy percentage that must be met for purposes of FHA project approval.
For more information see:
- The FHA Condominium Mortgage Insurance page at: https://www.hud.gov/program_offices/housing/sfh/ins/sfh_ins_condominiums
- To search for approved condominiums please visit: https://entp.hud.gov/idapp/html/condlook.cfm