Can You Buy a Condo With an FHA Loan? Project Approval and Rules

Yes, you can buy a condo with an FHA loan, but there is an extra layer of qualification beyond your own finances: the condo project itself has to be on HUD’s approved list, or your specific unit has to clear a separate Single-Unit Approval review. Once one of those two conditions is met, the same FHA terms available on a single-family home apply — a down payment as low as 3.5 percent and credit scores accepted from 580.

What You Need as the Borrower

FHA loans are insured by the Federal Housing Administration, which is what lets lenders offer easier terms than a conventional mortgage. With a credit score of 580 or higher, you can put down 3.5 percent. Scores between 500 and 579 still qualify, but the minimum down payment jumps to 10 percent.

Every FHA loan carries mortgage insurance premiums. You pay 1.75 percent of the loan amount upfront at closing, which can be rolled into the loan balance rather than paid out of pocket. Then you pay an annual premium billed monthly. On a standard 30-year loan with the minimum 3.5 percent down, that annual rate is 0.55 percent of the outstanding balance and runs for the life of the loan. Put down 10 percent or more and the annual rate drops to 0.50 percent and ends after 11 years.

FHA loans also cap out at a county-specific ceiling. For 2026, the floor in lower-cost areas is $541,287 for a single unit, and the ceiling in the highest-cost markets is $1,249,125. Your county falls somewhere in that range. A condo priced above your local limit pushes you into conventional financing.

Check Whether the Project Is FHA-Approved

Before you get attached to a specific unit, look up the building. HUD runs a public search tool at entp.hud.gov where you can find condominium projects by association name, city, and state.¹

Each project shows a status. “Approved” means the complex currently qualifies for FHA-insured mortgages. “Expired” means the certification lapsed. “Withdrawn” means it was removed. Only an active “Approved” status supports a standard FHA loan application. Approvals last two years from the date HUD adds the project to the list.² Look at both the status and the expiration date — a certification set to lapse mid-transaction can stall or unwind your closing.

What Makes a Condo Project Eligible

HUD looks at the building’s finances, its physical condition, who lives there, and how it is insured. The standards below are the ones that most often decide whether a building you like will work for FHA financing.

Residential Use

The project has to function primarily as housing. Commercial or non-residential space is capped at 35 percent of the total floor area by default.³ Mixed-use buildings with ground-floor retail can qualify as long as the residential portion dominates. HUD may grant exceptions in densely populated urban areas where more commercial space does not negatively affect residents.

Reserves and Delinquency

The homeowners association must allocate at least 10 percent of its annual budget to a reserve fund for capital expenses and deferred maintenance.⁴ No more than 15 percent of units can be more than 60 days past due on HOA assessments. Together, these numbers tell HUD the association can absorb a bad roof or a broken elevator without turning to a large special assessment.

Owner-Occupancy

At least 50 percent of units must be occupied by their owners rather than by tenants.⁵ Existing buildings older than 12 months can drop to 35 percent, but only with stronger financials behind them: reserves at 20 percent of the budget instead of 10, and delinquency below 10 percent of units.

FHA Concentration Cap

No more than 50 percent of units in a single project can carry FHA-insured mortgages at once.³ If a building has already hit that ceiling, an approved status alone will not let you buy there with FHA financing. You will have to wait for the ratio to shift.

Insurance

The association must carry a master hazard policy on the structure and common areas, plus general liability. Buildings in a Special Flood Hazard Area also need flood insurance through the National Flood Insurance Program covering both common areas and individual unit interests.⁶ Larger projects also need fidelity or crime insurance to cover theft or fraud by board members, employees, or management staff.

Completion

The project has to be fully built, with all common areas complete, and not subject to further construction phases or annexation unless HUD has approved a specific phasing plan.³ It also cannot be tangled in pending litigation that threatens the property’s value or habitability.

Single-Unit Approval When the Project Isn’t Approved

If the building you want does not have full project approval, you may still be able to use FHA financing under the Single-Unit Approval pathway. The building must contain at least five dwelling units and be fully constructed with all common areas complete.³

The concentration cap tightens sharply under this route. In projects with 10 or more units, HUD can set the FHA share anywhere from zero to 20 percent of total units. In smaller projects with fewer than 10 units, no more than two units can carry FHA insurance at any time. Your lender handles the review, pulling the association’s balance sheets, insurance declarations, governing documents, and assessment delinquency data. The building still has to meet the same core standards on reserves, commercial space, and insurance; it just does not have to sit on HUD’s project list.

HOA Red Flags That Block FHA Financing

Some buildings look fine at first glance but fail the underwriting review. These are the conditions that most often stop an FHA condo purchase:

Reserve funding below 10 percent of the annual HOA budget. Boards that keep monthly fees artificially low by underfunding reserves lock out FHA buyers.
More than 15 percent of unit owners over 60 days behind on HOA payments.
Owner-occupancy under 50 percent, or under 35 percent for buildings using the stricter-financials exception. High short-term rental use often pushes buildings across this line.
A missing or lapsed master hazard policy, liability policy, or required flood coverage. Insurance disputes during a budget fight can knock out every FHA loan in the building overnight.
Governing document provisions that could prevent a lender from foreclosing and reselling a unit after default, or a right of first refusal written in a way that conflicts with Fair Housing Act protections.²
Unfinished construction or active phasing without a HUD-approved phasing plan.

Expect to pay for HOA documentation as well. Management companies typically charge between $100 and $500 to prepare the financial records, questionnaires, and resale certificates your lender will request. The buyer usually pays those fees, and they vary by region and management company, so ask early.

The FHA Appraisal and Closing

Once you are under contract, the lender orders an FHA appraisal. The appraiser looks at market value, but also at health and safety conditions in both your unit and the shared areas. Roof damage, foundation problems, missing handrails on staircases with three or more steps, standing water, and significant deferred maintenance in common spaces can all hold up the loan even if your unit itself is in perfect condition.

The lender also reviews the association’s governing documents, financial statements, and litigation history during final underwriting. Active lawsuits against the HOA — particularly construction defect or habitability claims — can threaten the property’s value and give the lender grounds to decline. Once every condition is met, the lender issues an FHA case number, the file moves to closing, and title transfers.

1
U.S. Department of Housing and Urban Development. Condominiums – HUD
2
U.S. Department of Housing and Urban Development. Condominium Project Approval and Processing Guide
3
eCFR. 24 CFR 203.43b – Eligibility of Mortgages on Single-Family Condominium Units
4
U.S. Department of Housing and Urban Development. HUD Handbook 4000.1
5
HUD Archives. FHA to Lower Owner-Occupancy Requirement for Certain Condominium Developments
6
U.S. Department of Housing and Urban Development. Mortgagee Letter 2025-17 – Rescission of FFRMS for New Construction Eligibility