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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?

By Georgianne B. on 01.02.2019

Hello Georgianne,

HUD has a number or requirements the project must meet, but a minimum number of units being used as rentals is not one of them.  I have included a link to the HUD condo processing manual here:  If you start on Chapter 2, page 29 of the manual, you will start on the basic project requirements and unless your project is brand new, is considered unique or still controlled by the developer, most of the information prior to that will not pertain to you. 

There are a minimum number or units required, restrictions on investor ownership and plenty of other requirements HUD will make of the project (especially concerning budgetary, legal and insurance issues) but you will be hard-pressed to find anything that says that if none of the units are rented, the project will not qualify.  Simply put, 100% owner occupancy is not a reason for HUD to decline a project and is considered a good thing, not bad.

Perhaps it would be better for someone at the HOA or the association board to contact a service that handles project approvals rather than trying to call FHA directly?  Firstly, reaching anyone at HUD who will even talk to you about a project approval is difficult at best and if this is what they came away with, I am afraid they may have misinterpreted the conversation. 

One such company with whom our borrowers have successfully worked in the past is  We are not affiliated with this company and I would always encourage borrowers to check with more than one service to compare, but I do know that this company advertises that they do not charge a fee if they are unable to obtain an approval for your project so possibly your project can discuss the qualifications with them (and it might not be a bad idea for you to be involved as well if they will let you).


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