• FHA has specific rules for insuring mortgages on condos.Condo image by Leticia Wilson from Fotolia.com
  
  The Federal Housing Administration (FHA) insures mortgage loans on certain residential property, including condominiums. Although FHA condo loans have the same borrower guidelines as those for traditional single-family residences, certain limitations apply. FHA implements an approval process for condominium projects in order to insure the individual unit. Buyers who plan to purchase a condo using FHA financing should make sure the complex and the unit itself conforms to FHA's rules for condos.
  
  

FHA-Approved Condo Projects

• The U.S. Department of Housing and Urban Development (HUD) maintains a database for FHA-approved condo and townhouse projects. Condo units located within approved complexes are eligible for FHA financing because they have passed the HUD Review and Approval Process (HRAP). All conditions of the unit and complex must meet FHA regulations at the time of closing. Units not located in approved complexes are ineligible for FHA-financing. FHA eliminated the "Spot Loan" approval process, which allowed specific units to be approved for FHA financing, despite the complex where they were located.
  
  

Approval Processing

• Although FHA maintains a list of approved condo projects, they also allow lenders to determine project eligibility. FHA-approved lenders with unconditional Direct Endorsement (DE) authority may review project documentation and certify compliance with FHA's regulations. They may retain the project's "legal documents, contracts, conveyances, plats, plans, insurance coverage, presale and owner occupancy conditions and other documentation" in connection with the review and approval process, says HUD.
  
  

Ineligible Condo Properties

• "If the re-sale date is 90 days or less following acquisition by the seller, the property is not eligible for an FHA mortgage," says MyFHA.net. According to HUD, ineligible properties include condominium hotels or "condotels"; timeshares or segmented ownership projects; multi-dwelling unit condominiums in which there is more than one dwelling per condominium unit; and all projects not deemed to be used primarily as residential.
  
  

Eligible Condos

• Condominium projects that have been declared in full compliance with applicable state law requirements of the jurisdiction in which they are located, and with all other applicable laws and regulations, are eligible for FHA financing, according to HUD. Additionally, "site condominiums," single-family detached dwellings encumbered by condominium covenants or a condominium form of ownership, do not require project approval.