Condos and townhomes can be a practical path to homeownership in Minnesota, from lake-area associations in central Minnesota to newer townhome developments closer to the Twin Cities. If you are planning to use an FHA-insured mortgage, though, the building and the association matter almost as much as you do. HUD has specific rules about which condominium units are eligible for FHA financing, and some of the answers depend on paperwork the association controls. This guide explains how Minnesota law defines condos and other associations, how FHA project approval and Single-Unit Approval work, and what to ask before you write an offer.
Is it a condo? How Minnesota law defines it
Not every home with an association is a condominium. Minnesota's Common Interest Ownership Act, chapter 515B, uses the umbrella term "common interest community" for real estate where owners are obligated to help pay taxes, insurance, maintenance, or improvements on property other than their own parcel.
Within that umbrella, Minnesota Statutes section 515B.1-103 defines three types:
- A condominium is a common interest community in which portions of the real estate are designated as units, the remainder is designated for common ownership solely by the unit owners, and undivided interests in the common elements are vested in the unit owners.
- A cooperative is a common interest community in which the real estate is owned by an association, and each member is entitled to a proprietary lease by virtue of their ownership interest.
- A planned community is a common interest community that is not a condominium or a cooperative.
The document that creates the community is called the declaration under the same section. A townhome might be part of a condominium or a planned community, depending on how the declaration was written. That distinction matters for FHA, because HUD's condominium approval rules apply to condominium units.
FHA's basic condominium rule
HUD's FHA Resource Center states the rule plainly: a condominium unit must be located within an FHA-approved condominium project, meet FHA's definition of a site condominium, or have completed the FHA Single-Unit Approval process before a mortgage can be insured.
HUD notes a few exceptions where neither project approval nor Single-Unit Approval is required, including HUD Real Estate Owned transactions and FHA Streamline Refinances.
So for most purchases of a condo unit with an FHA loan, the first question is whether the project is already approved.
Checking whether a project is FHA-approved
HUD maintains a public search tool for FHA-approved condominium projects, which lets anyone search by location, name, or status. The link is on HUD's FHA Condominium Mortgage Insurance page.
The status shown matters. According to HUD's FHA Resource Center, a project listed in the lookup is not approved if its status is Expired, Rejected, or Withdrawn. HUD's guidance also notes that a "Registered Single-Unit" status is not the same as an approved project.
Approval does not last forever. HUD says condominium project approvals expire three years from the date of placement on the approved list. Continued participation requires recertification, which can be performed no earlier than six months before and no later than six months after the expiration date. If that window is missed, HUD says the project must re-apply for a full review.
Who can request project approval
If a project is not approved, the association may be able to seek approval. HUD's FHA Resource Center says applications may be submitted by a mortgagee, builder, developer, condominium association, management company, project consultant, or an attorney acting as agent. HUD states that applications from borrowers, homeowners, sellers, or real estate agents will not be processed and will be returned, although HUD may make case-by-case exceptions.
HUD says it does not charge a fee to review a condo project approval request, and processing time is within 30 calendar days from receipt of the package. That timeline may not fit every purchase contract, which is one reason to check status early.
Single-Unit Approval for unapproved projects
When a project is not FHA-approved, FHA's Single-Unit Approval process may still allow financing for an individual unit. HUD's FHA Condominium Mortgage Insurance page says that to be eligible for Single-Unit Approval, the unit must be in a project that is not FHA-approved, is complete and ready for occupancy, has at least five dwelling units, and is not a manufactured home. The project must also meet a subset of project approval requirements, including FHA insurance concentration, owner-occupancy percentage, and the financial condition of the project.
HUD's FHA Resource Center lists additional property requirements for Single-Unit Approval, including that:
- all units in the complete project or legal phase have a certificate of occupancy or equivalent;
- the subject unit has a certificate of occupancy issued at least one year ago, or has been occupied;
- the project does not have ineligible characteristics; and
- the project complies with FHA's free assumability requirements under 24 CFR 203.41.
HUD also sets a borrower requirement for Single-Unit Approval on forward mortgages: according to the FHA Resource Center, the application must receive an Accept from FHA's TOTAL Mortgage Scorecard, or, if manually underwritten, have a maximum loan-to-value of 90 percent.
The lender documents Single-Unit Approval using Form HUD-9991. HUD's FHA Resource Center lists other project criteria the lender must verify, including recorded documents, transfer of control, financial condition, insurance coverage, special flood hazard areas, and litigation.
Owner occupancy still applies to you
FHA's Single Family programs are generally for owner-occupied principal residences. HUD's FHA Resource Center explains that at least one borrower must occupy the property as their principal residence within 60 days of signing the security instrument and intend to continue occupancy for at least one year.
For a condo purchase, that means a unit you plan to live in. If you are considering a unit as a seasonal or second home, FHA financing is generally not designed for that use.
Minnesota's resale disclosure certificate
Minnesota adds a helpful document for condo and association purchases. Under Minnesota Statutes section 515B.4-107, when a unit owner other than the declarant resells a unit, the owner must give the purchaser certain documents, including a resale disclosure certificate from the association, before a purchase agreement is signed or otherwise before conveyance. The statute says the certificate must be dated not more than 90 days before the purchase agreement or conveyance, whichever is earlier.
According to the statute, the certificate covers items such as assessments and unpaid charges, extraordinary expenditures approved but not yet assessed, reserves for replacing components, the most recent balance sheet and income and expense statement, the current budget, insurance coverage and master-policy deductibles that may be passed to owners as loss assessments, and any unsatisfied judgments or pending lawsuits.
Section 515B.4-107 also requires the association to furnish the certificate within ten days after a request by a unit owner or the owner's authorized representative, and allows a reasonable fee.
Many of those same topics, such as budget, reserves, insurance, and litigation, show up in FHA's review. Reading the certificate early can help you spot potential concerns before your financing review begins.
Questions to ask before you make an offer
A few early questions can save time:
- Is the property legally a condominium, a planned community, or a cooperative under its declaration?
- Is the project on HUD's FHA-approved list, and what is its status and expiration date?
- If it is not approved, has the association pursued approval or recertification in the past?
- Is the project complete, and does it have at least five units?
- Can the seller provide the resale disclosure certificate promptly?
- Are there pending special assessments or lawsuits involving the association?
Sharing the project name and association contact with your loan contact early allows the status check to happen before deadlines in your purchase agreement.
Frequently asked questions
Can I use an FHA loan for any condo?
No. HUD says a condominium unit must be in an FHA-approved project, meet FHA's definition of a site condominium, or complete the Single-Unit Approval process before the mortgage can be insured.
How do I find out if a condo project is FHA-approved?
HUD offers a public search tool for FHA-approved condominiums on its FHA Condominium Mortgage Insurance page. HUD says a project with an Expired, Rejected, or Withdrawn status is not approved.
Can I apply for project approval myself as the buyer?
HUD says applications from borrowers, homeowners, sellers, or real estate agents will not be processed and will be returned, though HUD may make case-by-case exceptions. The association, management company, or a mortgagee are among the eligible submitters.
What is Single-Unit Approval?
It is HUD's process for approving an individual unit in a project that is not FHA-approved. HUD requires the project to be complete, have at least five units, not be a manufactured home, and meet a subset of project approval standards.
How long does FHA condo project approval last?
HUD says project approvals expire three years from the date of placement on the approved list, with a recertification window from six months before to six months after expiration.
Talk through a condo purchase
If you are considering a condo or townhome in central Minnesota, Davis Monroe Financial LLC can help you understand how FHA and other loan options may apply to the specific property. C
all (320) 200-5126 or email support@mydmf.com, with no pressure and no obligation.