BLOWNMORTGAGE.COM LENDER HOTLINE: 888-581-5008 Getting a mortgage on a condo is not impossible, but it does require a little extra work. This is true whether you plan on obtaining FHA, VA, USDA, Fannie Mae or Freddie Mac financing. Each group requires the condo development and association to meet certain requirements. If you are planning on obtaining FHA financing, then looking at HUD approved condos is to your benefit. If you find a condo that you like that is not yet approved, you can talk to the association or condo manager about getting it approved, but the process will take longer. If the condo you are looking at is approved by HUD, it will be eligible for FHA and possibly even USDA financing, if it is in a rural area according to the USDA. In most cases, condos are approved by HUD right when the condo development is constructed. Sometimes, however, the association or development does not pursue the approval for one reason or another and it becomes necessary later on down the road when someone is looking for FHA financing. There are standard requirements that must be met in order to gain the approval. The process can take a few weeks if everything is in order and provided in the first go around or it can take several months if more information is required. There are several categories that condos will fall in based on when they were built. There are condos that are still in the planning and developing process; those that are built but have been in existence for less than one year; condos that are older than one year but are still being controlled by the developer rather than the association; condos that are older and have been turned over to the association; and condo units that have already been approved by another entity, such as Fannie Mae or the VA. Each category has its own requirements that must be adhered to in order for them to get approved by HUD. Documents Required Despite the category that a condo falls into, there are certain documents that are necessary to reach the HUD approved condos list. Here are the documents required: -Legal Documents – Any documents that were recorded with the county need to be provided for HUD approval. The documents may include building plans, site map, plat of survey, Articles of Organization, the development’s Declaration and By-laws. -Financial Documents – HUD will also need to get a good handle on the project’s budget. This means that you will need to provide the budget that was set for the condo whether proposed or actual; a copy of previous years’ income and expense statements; and if the condo project is complete, a balance sheet showing the last 90 days’ worth of activity. There must be at least 10% of the budget set aside for reserves in order to gain approval.

1. HUD Approved
Condos
BLOWNMORTGAGE.COM

2. Getting a mortgage on a condo is not impossible, but it
does require a little extra work. This is true whether you
plan on obtaining FHA, VA, USDA, Fannie Mae or Freddie
Mac financing. Each group requires the condo
development and association to meet certain
requirements. If you are planning on obtaining FHA
financing, then looking at HUD approved condos is to your
benefit. If you find a condo that you like that is not yet
approved, you can talk to the association or condo
manager about getting it approved, but the process will
take longer. If the condo you are looking at is approved by
HUD, it will be eligible for FHA and possibly even USDA
financing, if it is in a rural area according to the USDA.
BLOWNMORTGAGE.COM

3. In most cases, condos are approved by HUD right when
the condo development is constructed. Sometimes,
however, the association or development does not pursue
the approval for one reason or another and it becomes
necessary later on down the road when someone is
looking for FHA financing. There are standard
requirements that must be met in order to gain the
approval. The process can take a few weeks if everything
is in order and provided in the first go around or it can take
several months if more information is required.
BLOWNMORTGAGE.COM

4. There are several categories that condos will fall in based
on when they were built. There are condos that are still in
the planning and developing process; those that are built
but have been in existence for less than one year; condos
that are older than one year but are still being controlled
by the developer rather than the association; condos that
are older and have been turned over to the association;
and condo units that have already been approved by
another entity, such as Fannie Mae or the VA. Each
category has its own requirements that must be adhered
to in order for them to get approved by HUD.
BLOWNMORTGAGE.COM

5. Documents Required
Despite the category that a condo falls into, there are certain
documents that are necessary to reach the HUD approved
condos list. Here are the documents required:
Legal Documents – Any documents that were recorded with the county
need to be provided for HUD approval. The documents may include
building plans, site map, plat of survey, Articles of Organization, the
development’s Declaration and By-laws.
Financial Documents – HUD will also need to get a good handle on the
project’s budget. This means that you will need to provide the budget
that was set for the condo whether proposed or actual; a copy of
previous years’ income and expense statements; and if the condo
project is complete, a balance sheet showing the last 90 days’ worth of
activity. There must be at least 10% of the budget set aside for
reserves in order to gain approval.
BLOWNMORTGAGE.COM

6. Documents Required
Proof of Flood Zoning – HUD needs to determine what flood zone, if
any, the condo development is located in. This means the zoning map
must be provided along with proof of flood insurance if it is located in a
flood zone.
Insurance Documents – Insurance requirements will vary by
development, but all certificates of insurance must be provided for
approval. There should be hazard insurance, possible crime insurance,
and flood insurance as described above. The coverage must include
replacement cost coverage in the event of a total disaster.
Management Documents – If the association has been turned over and
a third party management company handles the process, the
agreement made with the management company needs to be provided
for approval.
BLOWNMORTGAGE.COM

7. Documents Required
In addition to these standard documents, the association will be required
to provide documentation on any pending litigation that is going on with
the development. This could be little issues or very large ones – it does
not mean that the approval is automatically going to be denied; it simply
means that HUD wants to make sure the process is being cared for and
that appropriate insurance is in place to pay for the issue should the
development be found liable for it.
Last but not least, if there are special assessments that either occurred or
are going to occur in the near future, proper documentation needs to be
provided to detail what it is and why it is necessary. HUD needs to know
what the impact on the development will be as a result of the special
assessment and how it will affect the ability to sell the condos should the
need arise.
BLOWNMORTGAGE.COM

8. General Guidelines
HUD approved condos all have basic guidelines that they meet. This helps
to save time for everyone involved including the condo development,
HUD, and the lender because if even one of these requirements is not
met, the development will not meet with approval.
Half of the units in the development must be owner occupied. This
means that the mortgage holders live in the property. If even 49% of
the units are owner occupied, the development will not be able to
be approved by HUD.
BLOWNMORTGAGE.COM

9. General Guidelines
Association fees must be paid in a timely manner, with at least 85%
of the owners paid their dues on time. If less than 85% of the dues
are collected, HUD will be unable to approve the development.
The pending litigation must be taken care of and adequately
covered in the event that the association has to pay.
Insurance must be adequate to cover the exterior portions of the
development and be able to build it back up should natural disaster
or fire cause it to be destroyed.
BLOWNMORTGAGE.COM

10. Special Considerations for
Proposed Developments
A majority of the condos striving for HUD approved condos status are those that
are still being developed or are just in the proposal stage. These condos provide a
unique circumstance because they do not have any history for HUD to review in
order to determine their eligibility. The process tends to take a little longer for
condos in this category which is why the process should be started early on in the
development of the area.
BLOWNMORTGAGE.COM

11. Special Considerations for
Proposed Developments
In addition to any of the above documents that the development may have, the
new development needs to provide:
HUD form 92250 completed (Environmental Review form)
Proper description of the development including: quantity of units, accurate
description of the development, and description of any common areas
Proper map of the entire development
EEO Certification (Equal Employment Opportunity)
HUD Affirmative Fair Market Housing Plan form
Approval from the Historic Preservation Office
BLOWNMORTGAGE.COM

12. Special Considerations for
Proposed Developments
If the above requirements are met, HUD will provide an approval that is based on
certain conditions. Typically these conditions include the need for the condos to
be owner occupied in order to meet the 50% requirement. In addition, the
development needs to provide proof of a warranty against any defects that may
have been caused by the builder or materials used.
As an added requirement, at least 50 percent of the units in the development
must be presold or ready to close before HUD approval will be possible. This can
be proven with sales agreements; proof of units already sold; or proof from a
mortgagee that a loan will be provided.
BLOWNMORTGAGE.COM

13. Condos Less than One Year Old
Condo developments that are finished, yet are not quite 1 year old do not have a
long enough history for HUD to approve with the standard documents alone. HUD
will require a few special items in order to consider the new development
including:
Accurate description of the development, its units, and common areas
Map of the development
Survey
Any scheduled development that still may occur
Minutes from any association meetings that have occurred
All budget documentation and management plan documents should be drawn
up even if they are proposed since the development is so new
Proof of warranty and its length
If the warranty on the development is less than 10 years, the LTV financing for the
condo will be maximized at 90%. This does not affect the HUD approval, but does
affect the financing that will be offered.
BLOWNMORTGAGE.COM

14. Condo Developments not
Turned Over Yet
It can quite a while to get condo developments turned over to the association. If
this has not occurred yet, it does not mean that a development cannot get
approved; it simply means they must meet certain additional requirements:
Proof that all construction and development is complete
Proof of a completed budget and management plan even if the association has
not been turned over yet
If the condo development is more than 1 year old, there is no need for the 10-year
minimum warranty in order to obtain full FHA financing as long as all of the other
requirements for HUD approved condos are met.
BLOWNMORTGAGE.COM

15. Developments Already Approved
by the VA or Fannie Mae
In some situations, condo developments are approved by the VA or Fannie Mae
before they are approved by HUD. This makes it very easy to obtain HUD
approved condos. HUD typically just needs a few items in order to get the
approval going. The biggest thing is proving that at least half of the condos are
owner occupied. In addition, you will need to provide the approval from the VA
and any other conditions the HUD deems necessary, which typically fall in line
with the standard documents required for any condo approval.
BLOWNMORTGAGE.COM

16. Ineligible Properties for HUD
Condo Approval
There are certain types of condos that will not get on the HUD approved condos
list. The requirements are fairly straightforward and include the following types of
condos:
Any type of condos used for hotel purposes
Any type of timeshare
Condominium units that have more than one unit within it
Any condos not used for residential purposes
BLOWNMORTGAGE.COM

17. Ineligible Properties for HUD
Condo Approval
There are also certain environmental factors that will not be allowed for condos
that are approved by HUD. These situations include:
Condos within a flood zone that do not have proper flood insurance coverage
Condos located near excessive noise, such as highway noise, railroad noise,
or airport noise
Located near anywhere near a factory that deals with explosive materials
Located anywhere near a landfill
Properties that contain dangerous hazards
Properties located on a wetland
Condos located on historical land
BLOWNMORTGAGE.COM

18. CLICK HERE
TO LEARN MORE:
BLOWNMORTGAGE.COM
LENDER HOTLINE: 888-581-5008
BLOWNMORTGAGE.COM

19. INFORMATION PROVIDED BY:
Justin McHood
Mortgage Commentator
Information Originally Published: 12/06/15
Justin McHood is Americas Mortgage Commentator and has
been providing Mortgage commentary for over 10 years.
BLOWNMORTGAGE.COM

20. MORTGAGECOMMENTATOR.COM
@MORTGAGECOM_
FACEBOOK.COM/MORTGAGECOMMENTATOR
LEARN MORE ABOUT MORTGAGE COMMENTATOR:
LENDER HOTLINE:
888-581-5008
BLOWNMORTGAGE.COM