FHA Eases Condo Owner-Occupancy Requirements

Filed in Housing Finance by on October 27, 2016 1 Comment

Architectural details of modern apartment building.

The Federal Housing Administration (FHA) has announced new rules—effective immediately—that lower owner-occupancy requirements for existing condominium developments from the current 50% to 35% if they meet certain capital reserve and documentation requirements.

“HUD’s experience shows that higher reserves, a low percentage of association dues in arrears, and evidence of long-term financial stability allow for a lower owner-occupancy percentage without undue risk to the MMIF (Mutual Mortgage Insurance Fund),” the agency said in a press release .

For existing projects that are at least one year-old, FHA will lower the owner-occupancy requirement to 35% under the following conditions:

  • Applications are submitted for processing and reviewed under the HUD Review and Approval Process option.
  • Financial documents provide for funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 20% of the budget.
  • No more than 10% of the total units are in arrears (more than 60 days past due) on their condominium association fee payments.
  • Three years of acceptable financial documents are provided.

HUD previously announced proposed changes to the condo rules that would establish an owner-occupancy range between 25% and 75%, with the specific minimum percentage to be set through notice.

FHA will maintain its current owner-occupancy requirement of 30% for proposed and under-construction projects, including existing projects less than 12 months old. However, HUD’s proposed condo rule changes would eliminate approvals for proposed and under construction projects.

View FHA’s new rule. For more information, contact Curtis Milton at 800-368-5242 x8597.


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  1. Great News!
    More sales!
    More closings!
    ONwards and UPwards!

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