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Condo project eligibility checklist: Fannie Mae and FHA
A short yes/no test a board or realtor can run before a lender does. Answer each question for your project. If any answer is “no,” that agency’s standard is probably not met.
Scope and date. Fannie Mae items cite the Selling Guide topics B4-2.1-03, Ineligible Projects and B4-2.2-01, Full Review Process, both dated August 5, 2026 on the live pages. FHA items cite HUD Handbook 4000.1, Section II.C, Condominium Project Approval (Update 18, revised August 12, 2026). All checked October 9, 2026. This is general information, not legal or lending advice.
Agency rules versus lender overlays
The columns below are agency rules: the minimums Fannie Mae and FHA set for loans they will buy or insure. A lender overlay is an extra requirement a particular lender adds on top, such as a higher reserve percentage, a lower delinquency cap or a stricter owner-occupancy floor. Passing every item here does not mean a given lender will approve a unit. Ask the lender for its overlays in writing.
The checklist
| Question | Fannie Mae (Selling Guide) | FHA (Handbook 4000.1) |
|---|---|---|
| Delinquencies Are 15% or fewer of the units 60 or more days past due? |
Yes needed. No more than 15% of total units 60+ days past due on common expense assessments, and the same for each special assessment. B4-2.2-01 | Yes needed. No more than 15% of total units are Units in Arrears (late fees and administrative expenses excluded). II.C.2.c.vi(1) |
| Reserves Does the budget fund reserves at 10% or more, or does a current reserve study support the budget? |
Yes needed. Budgeted replacement reserve allocation of at least 10% of annual budgeted assessment income, or an acceptable reserve study meeting the guide’s conditions. B4-2.2-01 | Yes needed. Reserve account funded with at least 10% of the aggregate of 12 months of unit assessments, unless an acceptable reserve study (36 months old or less, independent, with a site visit) supports a lower amount. II.C.2.c.vi(1) |
| Commercial space Is commercial space 35% or less? |
Yes needed. No more than 35% of the project or 35% of the building. B4-2.1-03 | Yes needed. No more than 35% of total floor area; up to 49% only if the residential character of the project is maintained. II.C.2.c.ix |
| Single-owner concentration Is any one owner (or related party) within the limit? |
Yes needed. Projects of 21 or more units: no single entity owns more than 20%. Smaller projects have separate limits. B4-2.1-03 | Yes needed. 20 or more units: 10% or less per owner or related party. Fewer than 20 units: one unit per owner, none for a related party. II.C.2.c.vi(3) |
| Owner-occupancy Are at least half the units owner-occupied? |
Not tested in the sections checked. | Yes needed. Existing construction: at least 50%. A project over 12 months old at 35% to under 50% can qualify through HUD review (HRAP) if 10% or fewer of units are in arrears. II.C.2.c.iv |
| Litigation Is the association free of pending litigation over safety, structure, habitability or use? |
Yes needed. Ineligible when named in pending litigation over safety, structural soundness, habitability or functional use, subject to a minor-matter exception (damages and legal expenses not expected to exceed 10% of funded reserves). B4-2.1-03 | Yes needed. No pending litigation naming the project sponsor on those subjects, and no other litigation risk that is uninsured or exceeds coverage. II.C.2.c.xii(D) |
| Critical repairs Are there no unfunded repairs over $10,000 per unit due within 12 months? |
Yes needed. Unfunded repairs costing more than $10,000 per unit that should be undertaken within 12 months make a project ineligible. B4-2.1-03 | Not tested in the sections checked. |
| Association business income Is non-incidental business income 10% or less of budgeted income? |
Yes needed. Ineligible above 10% of budgeted income from non-incidental business arrangements. B4-2.1-03 | Not tested in the sections checked. |
| Project type Is it a primarily residential condo, not run as a hotel, timeshare or similar? |
Yes needed. Timeshare or fractional ownership, hotel or motel operation, continuing care communities and other listed types are ineligible. B4-2.1-03 | Yes needed. Primarily residential, not intended for rental for transient or hotel purposes, and made up of one-family dwelling units. II.C.2.c |
“Not tested in the sections checked” means we could not verify a standard for that agency in the sections cited, so we did not list one. It does not mean the agency has no rule. Fannie Mae also issues Lender Letters, so confirm against the current Selling Guide and any Lender Letters. FHA also applies other conditions, such as insurance, that are not part of this short list.
How to use it
- Boards: pull your latest budget, delinquency report and litigation list, and answer each row before a buyer’s lender asks.
- Realtors: use the “no” answers to set expectations early about which financing is realistic.
- Fixable versus fixed: reserves, delinquencies and repairs can change. Commercial space and project type generally cannot. See what a board can fix.
Where the rules come from
- Fannie Mae Selling Guide, B4-2.1-03, Ineligible Projects
- Fannie Mae Selling Guide, B4-2.2-01, Full Review Process
- HUD, Single Family Housing Policy Handbook 4000.1, Section II.C, Condominium Project Approval
Figures are quoted or paraphrased from those sources as read on October 9, 2026. If a number matters to a decision, confirm it in the current text, because both documents are updated over time.