My condo association finally agreed to apply for FHA/HUD approval, but they called me and said they talked to someone at FHA and were told that because we did not have any rented units we would not be approved. Is this true? How and why would we need to have units rented or for rent when all the units are occupied by the owners of the units? Am I just getting the runaround from the association or is that really a requirement for out project to be approved?
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Michael G. Branson, CEO of All Reverse Mortgage, Inc., and moderator of ARLO™, has 45 years of experience in the mortgage banking industry. He has devoted the past 20 years to reverse mortgages exclusively. (License: NMLS# 14040) |
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All Reverse Mortgage's editing process includes rigorous fact-checking led by industry experts to ensure all content is accurate and current. This article has been reviewed, edited, and fact-checked by Cliff Auerswald, President and co-creator of ARLO™. (License: NMLS# 14041) |
Michael G. Branson
Edited by 
Cliff Auerswald
Hello Georgianne,
HUD has several requirements a condo project must meet, but a minimum number of rental units is not one of them. If you’d like to review the official guidelines, you can find them in the HUD Condo Processing Manual here: HUD Manual. I recommend starting on Chapter 2, Page 29, which outlines the basic project requirements. Most of the earlier sections apply only to brand-new developments, unique projects, or those still under the developer’s control.
HUD does have certain conditions, including:
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A minimum number of total units
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Restrictions on investor ownership
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Budgetary, legal, and insurance requirements
However, there is no rule stating a project must have rental units to qualify. In fact, 100% owner occupancy is viewed as a positive factor, not a reason for denial.
If your HOA or condo association needs help with the approval process, it’s best to work with a professional service rather than contacting FHA directly. Reaching the right person at HUD can be extremely difficult, and there’s a chance that any prior communication may have been misinterpreted.
One company that has successfully helped borrowers with condo approvals is FHA Condos Approval. We are not affiliated with them, and we always recommend comparing services. However, they do offer a no-fee guarantee if they are unable to obtain approval, making them a solid option to explore. You may also want to be involved in the process if your HOA decides to move forward with them.
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