- Rentals vs. Owners: No more than 50% of the units can be investor-owned / rentals.
- 10/26/2016 update – There is an exception to this rule, which reduces the required owner occupancy to 35% (so up to 65% can be rentals). A special set of additional guidelines will apply. Condo complexes with at least 3 years of very stable finances, low delinquency rates, and an up-to-date Reserve Study may qualify for this exception.
- Commercial Space: No more than 50% of the property can be used as commercial space
- Delinquent Dues: No more than 15% of units can be delinquent in their HOA assessments for more than 60 days
- Single Investor Ownership: For properties with more than 20 units, no single investor, entity, or related party may own more than 10% of the units within the project. For properties with 20 units or less, no individual owner, entity, or related party may own more than one unit. (New rule as of 10/15/2019)
- No more than 50% concentration of FHA Loans within the community
THE BASIC FHA CONDO APPROVAL GUIDELINES IN 2023
Max 65% Renters Acceptable
Max 15% Delinquent Accts.
Max 49% Commercial Floor Space
Max 50% FHA Concentration
- Reserve funding requirement – at least 10% of all budgeted income must go toward a reserve account
- Adequate reserve funds required – This is subjective, but in our experience this means:
- Funds to cover all insurance deductibles
- Reserve Funds to cover capital repairs and replacements for the next 2 years (as determined by a recent reserve study)
10% of total budget must go toward reserves
Master or Blanket – Must be 100% of replacement cost of condominium, not including foundation or land
General Liability – Insures all common elements, and public ways
Fidelity Bond (aka Employee Dishonesty or Crime Insurance) – for communities with 20+ units. Covers the Board of Directors and Employees that handle association funds. Must be 3 months aggregate assessments of all units + Reserves. Note: This type of insurance is different than D&O
Flood insurance – Only required if located within 100-year floodplain. If required, it must be 100% replacement cost issued by NFIP.
Silent – No leasing restrictions in governing documents
Leasing Caps – A limited number of rentals permitted in the community
Board may require a copy of the lease
All leases must be in writing
Provide management or the Board with tenant information including names and address
A Requirement that the lease conforms to the legal governing documents of the association
Set minimum and/or maximum lease periods
Minimum must be 30 days OR state “no transient rentals”
Assignment of Rents – A requirement that rental income will be assigned to the association if the unit owner is delinquent in the payment of assessments
Corporate leasing restrictions
Require that the lease be on a community-specific form
Non-Acceptable Leasing Restrictions
Require potential tenants to “meet” with the Board – The only exception is if the “meeting” is strictly an orientation to the community and not mandatory
Require unit owner to check the Registered Sex Offenders list before leasing to a potential tenant
Community leasing Ban – A Minimum of one unit must be permitted to be leased at any given time
Seasoning Clause – unit owner must own the condo for a period of time prior to being allowed to lease
Require Board/HOA approval of lease – unless the “approval” is specifically for monitoring the number of rentals, this must be clear and recorded in a legal instrument. Any ambiguity will result in rejection
Allow accommodations typically associated with a hotel, such as a maid or front desk service.
Have the power to void leases
Require credit references or criminal background checks – The Unit Owner may require these, but not the HOA. Many of the condominiums that we review in Florida do not qualify for FHA Condo approval for this reason.
Required Documents for FHA Condo Approval
There are also several documents needed for FHA Condo Approval. The Board of Directors or Management Company is responsible for maintaining and storing most Association Documents. We are experts in obtaining documents available by public record; however, private Association documents are only available from the Board or Management Company. Click here to see a list of the documents needed for FHA Condo Approval.
FHA Condo Approval Guidelines: 2-4 unit condo complexes
The FHA offers alternative guidelines for the approval of 2-4 unit condo communities that do not have shared expenses or financial reports, such as a community bank account or budget. This alternative is known as a “Memorandum of Understanding.”
Memorandum of Understanding
A Memorandum of Understanding (MOU) outlines the maintenance obligations and responsibilities of each unit owner in a condo community. In order to implement the MOU, it must be signed and recorded with the County by an in-state attorney. The cost of this process typically ranges from $200 to $500, depending on the size of the community and the attorney.
By providing this document, the association no longer needs to provide financial reports, or comply with reserve requirements. With this document, they will meet the FHA Condo Approval guidelines.
FHA Condo Approval Guidelines: New Construction
New Construction has specific FHA Condo Approval Guidelines. For projects that are still under construction, recently converted, or less than 12 months old, a special set of guidelines will apply in order to gain FHA approval.
To become FHA Condo Approved, a developer must pre-sell or have under contract at least 30% of the units in Phase 1. If this requirement is not met, the project cannot continue. Additionally, new and under-construction projects require a larger amount of documentation, including environmental reports, site photographs, and permits. This is in addition to the standard list of 10 documents required for older condominiums.
The fee for a new construction project is $1,500 in total, and is nonrefundable. However, we will continue working with the project until it becomes approved.