For home buyers looking to purchase a condo using an FHA loan, the condo complex itself needs to either already be formally approved on the FHA Approved Condominium list or the home will need a Single-Unit Approval, formally known as a Spot Approval.
SUA, fully known as “Single-Unit Approval” is a relatively new process rolled out by HUD which allows lenders to utilize FHA financing for units in projects that are not approved. This process has a relatively narrow scope of use compared to the DELRAP process, with HUD needing to issue a SUA specific case-number assignment and FHA concentration being limited to about 10% of the total units in the project.
Expedite Your FHA Condo Approval Process
CrossCountry Mortgage can expedite this process with a relatively short list of documentation from the existing condo’s HOA within 48 hours. This will allow a prospective buyer to quickly determine the ability to use an FHA loan on a condo during the inspection period. Many lenders are quoting up to two weeks to coordinate this process with HUD.
Owner Occupancy
At least 35% of the project must be conveyed to Primary Residences or Second Homes.
- All of the following are considered owner occupied units:
- A unit that is occupied by the owner for any portion of the calendar year and is not rented for the majority of the year
- A unit that was previously occupied by the owner and is currently listed for sale and not listed for rent
- The denominator when calculating for a multi-phased condominium project includes the total number of units in the first declared legal phase and any subsequent legal phases. The numerator includes all units in the first legal phase and any subsequent legal phases that are considered owner occupied based on the criteria listed above.
- A unit owned by the builder/developer is not considered a primary residence or second home.
Ineligible Projects
A project with any of the following are ineligible for an FHA approved project review:
- The subject unit must not be a manufactured home.
- Individual Owner Concentration or Single-Entity Ownership (SEO) is not allowed when a single entity (the same individual, investor group, partnership, or corporation) owns more than a specified amount of units based on the type of project:
- If the total number of units in the project is greater than or equal to 20 units, SEO cannot exceed 10% of the project.
- If the total number of units in the project is less than 20 units, SEO cannot exceed 1 unit.
- On a multi-phased condominium project, the Individual Owner Concentration is calculated based on the total number of units in the first legal phase and any additionally added phases.
- For a single-phased condominium project, all units are used in the denominator when calculating the Individual Owner Concentration, except that unoccupied and unsold units owned by a builder/developer are excluded from the numerator and denominator in the Individual Owner Concentration calculation.
- The total number of declared units in the condominium project for complete condominium projects and gut rehab must be used to calculate the Individual Owner Concentration.
