FHA and VA Condo Approval

Section 1: Overview — Two approvals, two agencies, two buyer pools

FHA-insured and VA-guaranteed financing reaches a condominium unit only when the project carries the relevant agency's approval, and each agency holds that approval separately.¹ The FHA regime rests on the Housing Opportunity Through Modernization Act of 2016, HUD's Condominium Project Approval final rule at 84 Fed. Reg. 41846 (Aug. 15, 2019), and the operative detail in HUD Handbook 4000.1, Sections II.A.8.p and II.C.² The VA regime stands apart. It rests on its own regulations in title 38 of the Code of Federal Regulations, its own document package, its own legal review of the recorded instruments, and its own searchable list of approved projects.³

FHA offers a Single-Unit Approval path for an individual unit in a project that does not hold project approval, subject to a cap on the share of units that can be approved that way, and VA offers no equivalent.⁴ When approval lapses, and nothing notifies the board when it does, every unit's buyer pool contracts, because buyers relying on low-down-payment FHA loans and veterans using VA entitlement cannot close in an unapproved project.⁵ FHA approval, VA approval, and Fannie Mae and Freddie Mac eligibility are three independent determinations, and this page does not restate the GSE regime. The sections that follow set out each regime's standards, the operational steps to gain and keep approval, and recent federal activity.

Section 2: The two approval regimes

2A. FHA project approval after the 2019 rule

Title III of the Housing Opportunity Through Modernization Act of 2016 (Pub. L. 114-201) amended the National Housing Act and directed HUD to make condominium recertification substantially less burdensome than initial certification, to consider lengthening the time between certifications, and to allow updating of information rather than resubmission.⁶ HUD published its implementing final rule, Docket No. FR-5715-F-02, at 84 Fed. Reg. 41846 on August 15, 2019, and it took effect October 15, 2019, with the operating detail carried in HUD Handbook 4000.1, Sections II.A.8.p ("Condominiums") and II.C ("Condominium Project Approval").² The rule and handbook replaced several fixed thresholds with default standards that HUD can move within stated bands by mortgagee letter.⁷

The standards a project must satisfy, each stated with its exception where one exists, run as follows. Owner-occupancy must reach at least 50 percent for most existing projects, but an existing project more than 12 months old may qualify with owner-occupancy as low as 35 percent if no more than 10 percent of units are more than 60 days in arrears and reserves equal at least 20 percent of the budget. HUD may set the requirement anywhere from 30 to 75 percent by mortgagee letter, and two-to-four-unit projects must be 75 percent owner-occupied.⁸ Commercial and non-residential space may not exceed 35 percent of total floor area, with case-by-case exceptions up to 49 percent, and HUD may set the limit from 25 to 55 percent by mortgagee letter.⁹ FHA-insured concentration is capped at 50 percent of units for project approval, adjustable from 25 to 75 percent by mortgagee letter.¹⁰ No single investor or related party may own more than 10 percent of units in a project of more than 20 units, or more than one unit in a project of 20 units or fewer.¹¹

HUD reviews budget and reserve adequacy, pending litigation, and physical condition against the handbook standard rather than a single percentage.¹² Approval lasts three years. A project may file for recertification no earlier than six months before and no later than six months after the expiration date, and a project that misses that window loses its eligibility for recertification and must re-apply for full review.¹³ Anyone can check status on HUD's public condominium search, and lenders work through FHA Connection.¹⁴

2B. Single-Unit Approval

Single-Unit Approval opens a path to FHA mortgage insurance for an individual unit in a project that does not hold FHA project approval.⁴ The unit must sit in a completed, occupancy-ready project of at least five units that is not manufactured housing, and the project must meet a subset of the project-approval standards, including FHA-insured concentration, owner-occupancy, and financial condition.¹⁵ The defining limit is a concentration cap. In a project of 10 or more units, no more than 10 percent of units may carry FHA-insured mortgages, and a project of fewer than 10 units may have no more than two.¹⁶ The governing regulation gives HUD a range of 0 to 20 percent for the larger projects, with the operative ceiling currently set at 10 percent.¹⁷

For a board, three points matter. Single-Unit Approval does not substitute for project approval and does not place the project on the approved list. The lender drives it at the point of a case-number request rather than the association. And it has no VA counterpart.⁴ A board can supply accurate association documents, meaning the budget, reserve information, insurance certificates, and owner-occupancy and delinquency data, when a lender requests them, but a board cannot obtain a Single-Unit Approval on its own.¹⁸

2C. VA project approval as a separate track

VA guarantees a loan on a condominium unit only after it approves the project itself. The governing regulations sit at 38 C.F.R. § 36.4360 and the following sections, and § 36.4360(c) requires that the Secretary approve the legal documentation establishing the project before VA guarantees any individual-unit loan.¹⁹ VA review centers on the recorded instruments. VA examines the declaration, bylaws, and other enabling documents for compliance with 38 C.F.R. § 36.4360 and the following sections and with applicable state law, and it handles the appraisal and minimum property requirements separately under § 36.4365.²⁰ That legal-instrument emphasis differs from HUD's more standardized financial and occupancy screen. VA runs no single-unit path. A unit in an unapproved project cannot be financed with a VA loan, and the only routes are project approval or, in limited circumstances, a one-time property-specific waiver.²¹

VA's acceptance of projects previously approved by HUD is limited and era-dependent. Under Circular 26-09-19 (issued November 30, 2009, effective December 7, 2009) and its Change 1 (May 17, 2010), VA no longer accepts HUD or FHA approvals dated on or after December 7, 2009, while projects VA accepted based on HUD or FHA acceptance before that date remain acceptable and appear as "HUD Accepted" in VA's list.²² A "HUD Accepted" entry reflects a pre-2009 record rather than current FHA status, and VA approval and FHA approval stand independent of each other. So a community with veteran buyer demand should confirm current standing on VA's condominium report rather than assume FHA status carries over.²³

Section 3: What associations must do to gain and keep approval

A. Assembling the package

In practice, association counsel, a sponsoring lender, and management assemble the package together, because both agencies review documents rather than accept self-certification. FHA documents project approval on Form HUD-9992 and typically requires the recorded declaration and amendments, bylaws, the current budget, reserve information, insurance certificates, litigation disclosures, and plat or plan documents.²⁴ VA requires a parallel package for Regional Counsel review, with the recorded declaration, bylaws, budget and financial statements no older than 60 days, and insurance evidence. A project that is not on the approved list must submit the full package to become eligible.²⁵

B. Meeting the substantive standards

Both agencies review reserves, budget, insurance, owner-occupancy, investor concentration, commercial space, litigation, and physical condition. FHA sets these largely as stated thresholds in Handbook 4000.1 Section II.C, including at least 50 percent owner-occupancy for most existing projects, a 50 percent FHA-insured concentration cap, a 35 percent commercial-space limit, and reserve funding of at least 10 percent of the budget.²⁶ VA reviews the same categories but keys them to its regulations at 38 C.F.R. § 36.4360 and the following sections, with the recorded instruments and the association's legal structure carrying more weight than fixed occupancy percentages.²⁰ Where the two agencies address the same item, FHA tends to apply a numeric standard and VA a legal-document standard.

C. Keeping approval current

FHA approval expires after three years, and a project can recertify only within the six-month window before or after expiration. Miss it, and the project must re-apply for full review.¹³ VA project approval does not run on the same fixed three-year recertification cycle, so the practical monitoring task differs by agency. Boards should check status on the public lookups, HUD's condominium search and VA's condominium report.²³ Neither agency notifies a board of expiration, so the reliable practice is an internal calendar entry keyed to the FHA expiration date, set well before the recertification window closes.

D. When approval is denied or lost

The recurring denial reasons are inadequate reserves, insurance gaps, active or threatened litigation, high investor concentration, excessive commercial space, and incomplete documents.²⁷ Several of these are correctable. A project may cure the defect and resubmit, or in FHA's case seek reconsideration of a rejected or withdrawn project under Handbook 4000.1 Section II.C.²⁸ When a project is unapproved or lapsed, the accurate step is to disclose current FHA and VA status to sellers and their agents so financing contingencies reflect reality, using the two public databases as the source of record.²³

Section 4: Recent rulemaking, guidance, and legislative activity

A. Recent rulemaking and guidance

B. Program and market developments

C. Legislation and active debates

The FHA-to-GSE condominium reciprocity idea that CAI and CHLA advanced in September 2025 is the live policy debate over approval barriers, but it remains an advocacy position rather than an enacted or pending statutory change.³¹ The ROAD to Housing Act of 2025 (S. 2651, 119th Congress), a bipartisan package of 40 provisions introduced by Banking Committee Chairman Tim Scott and Ranking Member Elizabeth Warren, cleared markup unanimously, 24-0, on July 29, 2025. The Senate Committee on Banking, Housing, and Urban Affairs reported it on August 1, 2025, and the Senate then folded it into its version of the FY2026 National Defense Authorization Act (S. 2296), which passed the Senate on October 9, 2025. Its FHA provisions, including the Section 213 Housing Affordability Act directing a study and rulemaking on FHA multifamily loan limits, address multifamily loan limits, small-dollar lending, and appraisal matters rather than condominium project or single-unit approval, and the enacted NDAA did not retain the ROAD text.³² No bill specifically amending the FHA or VA condominium-approval regimes was pending as of July 28, 2026.³²

Section 5: Interaction with state law and related coverage

Federal approval standards do not displace state law. The recorded declaration and amendments, state reserve and inspection statutes, state insurance minimums, and state resale-disclosure rules all continue to govern the association, and they generate the very documents an FHA or VA approval package requires. That is why a change in state reserve or inspection law can ripple into federal approval.³³ Resale disclosure practice is where approval status usually surfaces, when a buyer's financing depends on it, so the state Estoppel and Resale column is the natural next stop. FHA and VA approval are also distinct from Fannie Mae and Freddie Mac eligibility, which runs as a separate contractual regime. Readers tracking the state obligations behind an approval package should turn to the state Condo Safety Inspections, Estoppel and Resale, and Governing Statute columns.

HOA Weekly's FHA and VA approval coverage updates quarterly as HUD and VA revise their handbooks and regulations. The state-level obligations that produce the underlying documents, meaning reserves, inspections, insurance, and resale disclosure, run throughout the state matrix, in the Condo Safety Inspections, Estoppel and Resale, and Governing Statute columns.

Footnotes

1. HUD, FHA Condominiums (Condominium Mortgage Insurance); 38 C.F.R. § 36.4360(c) ↩
2. Project Approval for Single-Family Condominiums, 84 Fed. Reg. 41846 (Aug. 15, 2019); HUD, FHA Condominiums (Sections II.A.8.p and II.C, effective Oct. 15, 2019) ↩
3. 38 C.F.R. § 36.4360, Condominium loans—general; VA Loan Guaranty, Condo Report ↩
4. HUD, FHA Condominiums (Single-Unit Approval) ↩
5. 84 Fed. Reg. 41846 (Aug. 15, 2019) ↩
6. Housing Opportunity Through Modernization Act of 2016, Pub. L. 114-201, Title III (amending 12 U.S.C. 1709) ↩
7. 84 Fed. Reg. 41846, Percentage Ranges (owner occupancy, commercial/nonresidential space, FHA-insured concentration) ↩
8. HUD Knowledge Base KA-02392 (owner-occupancy: 50%, 35% existing-construction exception, two-to-four-unit 75%); 84 Fed. Reg. 41846 (owner-occupancy range floor set at 30%) ↩
9. 84 Fed. Reg. 41846 (commercial/nonresidential space: 35% default, exceptions to 49%, range 25–55%) ↩
10. FHA Connection, Condominium Project Approval Help; 84 Fed. Reg. 41846 (FHA-insured concentration for project approval) ↩
11. 24 C.F.R. § 203.43b; Form HUD-9992 (Individual Owner Concentration) ↩
12. HUD, FHA Condominiums (insurance coverage, financial condition, pending legal action, physical property condition) ↩
13. HUD Answers, FHA Condominium Project Recertification Requirements (three-year period; six months before/after expiration) ↩
14. HUD, Search for FHA-Approved Condominiums; FHA Connection, Condominium Project Approval Help ↩
15. HUD, FHA Condominiums (Single-Unit Approval eligibility: not FHA-approved, complete, ≥5 units, not manufactured) ↩
16. FHA Connection, Single-Unit Approval Help (10% cap for 10+ units; max two for fewer than 10) ↩
17. 24 C.F.R. § 203.43b; 84 Fed. Reg. 41846 (0–20% range; 10% ceiling by notice) ↩
18. HUD, FHA Single-Unit Approval Required Documentation List (Form HUD-9991, lender-submitted) ↩
19. 38 C.F.R. § 36.4360(c), Project approval (Secretary approval of legal documentation required before guaranty) ↩
20. 38 C.F.R. § 36.4361, Acceptable ownership arrangements and documentation; 38 C.F.R. § 36.4365, Appraisal requirements ↩
21. 38 C.F.R. § 36.4360 (project approval prerequisite; no single-unit path) ↩
22. VA Circular 26-09-19 (Nov. 30, 2009; effective Dec. 7, 2009), Change 1 (May 17, 2010) ↩
23. VA Loan Guaranty, Condo Report (project status database) ↩
24. HUD, FHA Condominium Project Approval Required Documentation List (Form HUD-9992) ↩
25. 38 C.F.R. § 36.4361 (documentation); VA Circular 26-09-19 (full document package to VA Regional Counsel) ↩
26. HUD, Form HUD-9992 Instructions (Handbook 4000.1 Section II.C standards) ↩
27. HUD, FHA Condominiums (financial condition, insurance, litigation, and physical condition review factors) ↩
28. HUD Handbook 4000.1, Section II.C.d, Reconsideration of Rejected or Withdrawn Condominium Projects ↩
29. HUD, Housing Handbooks (4000.1, Nov. 26, 2025 version); HUD Handbook 4000.1 Transmittal Update 17 (Condominiums 08/19/2024; Section II.C provisions 10/15/2019) ↩
30. HUD, FHA Condominiums (2019 final rule and handbook remain operative condo authority) ↩
31. CAI and CHLA, "CAI and CHLA Urge Presidential Emergency Housing Declaration Expanding FHA Condo Loan Flexibility" (Sept. 17, 2025) ↩
32. Congressional Research Service, R48732, ROAD to Housing Act of 2025 (S. 2651); S. 2651, 119th Congress ↩
33. HUD, FHA Condominiums (projects must comply with applicable state law and remain in good standing) ↩