If you are thinking of buying a condo or townhouse with an FHA loan product, we’ve got some good news for you: the Department of Housing and Urban Development (HUD) just made it easier to buy a condo using their Federal Housing Agency (FHA) low down-payment loans. 

The first thing to note is that, in order to buy a condo or townhouse using an FHA loan product, your unit will need to get “approval” from HUD. In the past, it has been difficult to buy a condo using an FHA mortgage due to stringent regulations around the complexes buyers were allowed to purchase in. This reduced the inventory of more affordable condos and townhomes available to FHA buyers in an already scarce market. 

Fortunately, things are changing. A few highlights from the new HUD rules, which will go into effect Oct. 15, include: 

  • In buildings with 10 or more units, HUD will allow for single-unit mortgage approvals—often known as spot approvals. This means that you will be able to get an individual condo approved, even if the entire complex is not approved.
  • Previously, a complex needed to have at least 50% owner-occupancy to get approved for FHA financing. Now, HUD will consider approving complexes with an owner-occupancy level as low as 35% for older properties in good financial standing. 
  • More mixed-use projects, or those with more commercial space, will be eligible for approval.
  • More units in new condo projects will be allowed to have FHA loans. 


These changes are welcome at a time when housing affordability is a serious issue in California, and condos are an important source of affordable housing. These revisions are expected to qualify 20,000 to 60,000 more condo units annually for FHA loans. If you’d like to learn more about these changes, take a look here and here

If you would like to speak to a local lender about your options, we recommend Ryan Buckholdt. Ryan has helped individuals and families purchase homes in the Santa Cruz area for more than 22 years and he understands the complexities of real estate financing. You can find his contact information here.

Curious about condos and townhomes on the market? Pursue the current inventory here. If you’d like to see in depth market stats on our local Santa Cruz Condo market, check out this tool

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