You find a condo you love. Your budget works. Then your lender tells you the building isn't on the FHA approved condo list — and you start to wonder if the deal is dead. In most cases, it's not. But you need to understand how FHA condo approval actually works before you make any decisions. This is one of the most misunderstood parts of buying a condo with an FHA loan, and it trips up buyers every week.

We work with buyers in Colorado and Florida who hit this exact wall. So let's walk through what the approval process really means, how to check a condo's status, and — most importantly — what your options are when a building isn't approved.

What FHA Condo Approval Actually Means

When most people think about FHA approval, they picture the lender reviewing the borrower — your credit, income, and debt. But with condos, there's a second layer. The government also reviews the building itself.

The Federal Housing Administration insures the loans lenders make. Because of that, HUD requires condo projects to meet certain financial and structural standards before FHA will back a loan there. So even if you qualify as a borrower, the condo project needs to qualify too.

This doesn't apply to single-family homes or townhomes. It only applies to condos in buildings where units share common areas and a homeowners association (HOA) governs the property. According to HUD's Federal Housing Administration, FHA-insured loans support homeownership for borrowers who may not qualify for conventional financing — and condo project approval is part of how HUD protects that investment.

A condo project gets FHA approval through a review process called Full Project Approval (FPA). When a project passes, HUD adds it to a searchable database. That's the "approved list" you've probably heard about. However — and this matters — being off that list doesn't always mean FHA financing is impossible.

How to Check If a Condo Is FHA Approved

You can search HUD's condo approval database directly. Type in the condo name, city, or zip code. The tool will show you the project's current approval status, expiration date, and the number of approved units.

According to HUD data, only about 6.5% of the roughly 150,000 condominium projects in the United States are FHA-approved.

What FHA Looks for in a Condo Project

FHA doesn't just check if the building is standing. The review covers the financial health of the HOA, how the units are used, and whether the project carries enough insurance. Per HUD's condominium project approval guidelines, at least 50% of units in a project must be owner-occupied to qualify for full FHA project approval.

That owner-occupancy rule matters. A building with many rental units is a red flag for FHA because absentee landlords tend to disengage from HOA governance, which can lead to deferred maintenance and budget shortfalls. Beyond that threshold, here's a summary of what FHA reviews:

These rules exist to protect both you and FHA. A financially unstable HOA can let a building deteriorate fast. So when HUD reviews these criteria, it's looking at whether the whole community is on solid footing — not just your unit.

What If the Condo Isn't on the Approved List?

This is where most buyers stop. They see "unapproved," and they start looking for a different property or switch to a conventional loan. But there's a third option that came from a major HUD policy update in 2019.

Under HUD Mortgagee Letter 2019-01, FHA expanded Single Unit Approval — sometimes called spot approval — to allow FHA financing on individual condo units in projects that have not received full FHA project approval, subject to specific eligibility conditions. This was a big deal. Before 2019, spot approvals were very limited. Now they're a real tool buyers and lenders can use.

Single Unit Approval (SUA) lets your lender review the specific unit and project on a case-by-case basis. So even if the whole project hasn't gone through full approval, you may still be able to use FHA financing.

When SUA Works — and When It Doesn't

SUA isn't automatic. The project still has to pass a review. The same FHA standards apply — owner-occupancy ratios, delinquency rates, insurance, and litigation. But instead of the HOA applying for project-wide approval, your lender performs the review as part of your loan file.

SUA also has limits. FHA won't approve SUA for new construction condos, projects that aren't at least 75% sold, or projects that have had their FHA approval pulled for cause. So if a project was rejected after a failed review, SUA isn't a workaround.

In our experience working with buyers in Colorado and Florida, SUA works well for established condo communities where the HOA just hasn't pursued project approval — often because the demand hasn't come up before. It's worth asking your lender to look into it before you walk away from a property.

What Actually Gets a Condo Rejected

Understanding what disqualifies a project helps you ask better questions before you make an offer. Per HUD guidelines, a condominium project can be rejected if more than 15% of unit owners are more than 60 days delinquent on HOA dues. That's a common one — and it's a number that can change from month to month.

Here are the most common reasons we see condo projects fail or lose FHA approval:

• High investor concentration. Too many rental units pushes the project below the 50% owner-occupancy floor. This is the most common disqualifier in urban buildings.
• Inadequate reserves. An HOA that doesn't save enough for repairs can't meet the 10% reserve requirement. Buyers should ask for a reserve study before closing on any condo — regardless of loan type.
• Pending litigation. If the HOA is in a legal dispute — especially one involving construction defects — FHA won't approve the project. This isn't always visible from the outside, so ask the HOA directly.
• Too many FHA loans already. Once 50% of units in a project carry FHA-insured mortgages, no new FHA loans can close there until that concentration drops.
• Short-term rental use. Projects that allow hotel-style rentals through platforms like Airbnb often fail the owner-occupancy test — or include transient-use language in their HOA docs that disqualifies them entirely.
• Expired approval. The project was once approved, but no one renewed it. This happens more than you'd think, especially in buildings where HOA management has turned over.

For Colorado homebuyers, short-term rental condo buildings in mountain resort areas are a frequent source of this problem. Many ski-area condo developments explicitly allow vacation rentals, which makes them ineligible for FHA project approval — and often for Single Unit Approval too.

According to HUD's FY 2024 Annual Report, FHA-insured mortgages accounted for 13.64% of all U.S. mortgages in 2024 — and more than 8 out of 10 FHA purchase borrowers were first-time homebuyers.

Frequently Asked Questions About FHA Condo Approval