When is the owner-occupancy requirement applicable on condominium projects?

Owner Occupancy requirements are applicable at the time of condominium project approval and at mortgage approval for units in approved condominium projects.  For Single Unit Approvals, Owner Occupancy requirements are applicable at the time of mortgage approval.
 
Owner-occupied Units include any Unit:

  • occupied by the owner as his or her place of abode for any portion of the calendar year and that is not rented for a majority of the year;
  • listed for sale, and not listed for rent, that was previously occupied by the owner; or 
  • sold to an owner who intends to occupy the Unit.
A Unit owned by the builder/developer is not an owner-occupied Unit.


At the time of Project Approval, the following Owner-occupancy requirements apply:
 
Project Status Owner Occupancy Requirement
Existing (condominium projects fully completed and over one year old – applies to non-gut rehab conversions)  
The acceptable level of owner occupancy must be at least 50 percent of the total number of units in a project.
The owner occupancy requirements may be as low as 35 percent if the project meets the conditions outlined below under Exception for Existing Construction.
New Construction – Complete Condominium Projects (including existing projects less than 12 months old and Gut Rehab conversions) FHA will allow a minimum owner occupancy percentage of at least 30 percent of the declared units.  Legally phased projects must meet 30 percent owner-occupancy requirements.
 
Exceptions for Existing Construction
Existing projects (greater than 12 months old) with an owner occupancy percentage of at least 35 percent and less than 50 percent are eligible for approval under the following circumstances and subject to the following conditions:
  • Applications must be submitted for processing and review under the HUD Review and Approval Process (HRAP) option; and
  • No more than 10 percent of the total units can be in arrears (more than 60 days past due and does not include late fees or other administrative expenses) on their condominium association fee payments.
The Owner Occupancy at time of project approval must be documented on
  • Form HUD-9992, FHA Condominium Project Approval.

Two- to Four-Unit Condominium Project
For a New Construction or Existing Construction condominium with two- to four-units, the project must have an Owner Occupancy percentage of 75 percent.
 
The Owner Occupancy at time of project approval must be documented and submitted with the required documentation.

 
At the time of Mortgage Approval, the following Owner-occupancy requirements apply to units in all approved condominium projects:
At least 35 percent of the units of a condominium project must be owner-occupied or sold to owners who intend to occupy the unit(s).
 
The Owner Occupancy at time of mortgage approval must be documented on
  • Form HUD-9991, FHA Condominium Loan Level/Single-Unit Approval Questionnaire.

At the time of Mortgage Approval, the following Owner-occupancy requirements for Single-Unit Approval apply to Units in Condominium Projects not approved by FHA:
At least 50 percent of the units of a condominium project must be owner-occupied or sold to owners who intend to occupy the unit(s).
 
The Owner Occupancy at time of mortgage approval must be documented on
  • Form HUD-9991, FHA Condominium Loan Level/Single-Unit Approval Questionnaire.
 
For more information regarding condominium projects please refer to: To identify the jurisdictional Homeownership Center for the state where the condominium project is located please visit: ttps://www.hud.gov/program_offices/housing/sfh/sfhhocs

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-02392