When it comes to buying or selling a condominium, or managing one through a homeowners association, one of the most important and often overlooked steps is the condo project review. Whether you’re a buyer, seller, developer, or part of an HOA board, the type of review your condo project undergoes—FHA or Conventional—can significantly impact financing options, marketability, and even long-term property values.
Understanding the differences between FHA and Conventional condo reviews is not only important for compliance, but also for strategic decision-making. From loan eligibility to buyer access, every detail matters. In this guide, we’ll explain the purpose of each review type, compare their requirements, and help you determine which one suits your specific needs.
What is a Condo Review and Why Does It Matter?
A condo review is an evaluation of the entire condominium project, not just individual units. Lenders must determine whether a condo development meets the criteria set by either government-backed loan programs like the FHA or government-sponsored enterprises such as Fannie Mae and Freddie Mac, which back Conventional loans.
Unlike single-family homes, condominiums share ownership of common areas and building structures. This shared ownership brings added risk for lenders, which is why they require a thorough review of the project’s financial health, occupancy rates, insurance coverage, and legal standing before approving a mortgage.
If a condo project does not meet the appropriate requirements, buyers may not be able to obtain financing—even if they are otherwise qualified. This means that project approval directly affects the buyer pool and property liquidity.
FHA Condo Reviews: Opening Doors for More Buyers
FHA condo reviews are designed to ensure a development meets the eligibility guidelines of the Federal Housing Administration. FHA loans are attractive to many first-time homebuyers due to their low down payment requirements and more flexible credit standards. However, not every condo project qualifies for FHA financing.
To be eligible, the entire condominium development must undergo and pass an FHA project review. While some individual units can qualify under the FHA’s Single-Unit Approval rule, this is a limited-use option that comes with strict criteria and is not guaranteed.
FHA reviews focus on several core criteria including owner-occupancy rates, delinquency percentages on HOA dues, sufficient reserve funding for maintenance and repairs, and the absence of any serious ongoing litigation. Projects must also carry specific types of insurance and cannot be primarily commercial in nature.
The FHA review process can be more time-consuming due to the level of documentation required, including financial statements, meeting minutes, insurance policies, and legal disclosures. However, for many communities, the benefits outweigh the effort. FHA-approved projects are accessible to a broader range of buyers and are often more competitive in markets with a high percentage of first-time purchasers.
For HOAs and developers, securing FHA approval can significantly increase the market appeal of a project, especially in entry-level or affordable housing segments.
Conventional Condo Reviews: Flexibility for Stronger Borrowers
Conventional condo reviews are conducted under the guidelines set by Fannie Mae and Freddie Mac. These reviews are common among buyers who are putting down larger deposits and have stronger credit profiles. While they require fewer government-imposed restrictions, they still maintain rigorous standards to minimize risk.
One advantage of Conventional reviews is the variety of review types available based on the buyer’s loan-to-value ratio and intended use of the unit. A full review is the most thorough and is required for loans with higher loan-to-value ratios or for projects with more than 10 units. Limited reviews, which require less documentation, are available for buyers purchasing primary residences with lower loan-to-value ratios. This streamlined approach helps speed up the underwriting process.
Conventional reviews also assess occupancy levels, reserve funding, insurance coverage, and the project’s litigation status. Projects must demonstrate financial stability and compliance with acceptable investor concentration limits. For example, no single entity should own more than 20 to 25 percent of the units, depending on the guidelines in effect at the time.
Unlike FHA approvals, which expire and must be re-certified every three years, Conventional condo approvals do not require recertification. This makes them attractive for long-term planning, especially in stable, well-managed communities.
Developers often favor Conventional reviews for mid-to-luxury projects where the target buyer demographic has access to stronger credit and is less reliant on government-backed loans. Conventional financing also supports second homes and investment properties, offering broader use cases for potential buyers.
Choosing the Right Condo Review for Your Needs
Determining whether your condo project needs an FHA or Conventional review depends largely on your goals and your audience.
If you are a first-time buyer using an FHA loan, then the project must have FHA approval or meet the strict criteria for single-unit approval. If you’re a buyer with a higher credit score and a larger down payment, a Conventional loan may be more appropriate and less restrictive in terms of project eligibility.
For sellers and HOAs, the right choice depends on who you’re trying to attract. If your community is in an area with a high concentration of FHA buyers, then securing FHA approval could lead to faster unit sales and higher occupancy rates. On the other hand, if your property is located in a market that caters to investors or high-income professionals, then ensuring the project meets Conventional review standards may be sufficient and more efficient.
It’s also worth noting that both FHA and Conventional loans offer unique benefits, and having both approval types available gives a condo development the most flexibility and broadest appeal.
Why Expert Help Makes a Difference
Navigating the condo review process can be complex, particularly for projects with financial or legal challenges. Both FHA and Conventional reviews require careful preparation, detailed documentation, and thorough understanding of constantly evolving guidelines.
Working with a professional team that specializes in condo approval services ensures your project is positioned for success. Whether you’re dealing with owner occupancy issues, reserve funding shortfalls, or just don’t have time to manage the paperwork, expert guidance can save you time and protect your investment.
A knowledgeable condo approval consultant will review your documentation, identify potential red flags, and prepare a compliant submission package that increases your likelihood of approval—often on the first try.
Lenders, real estate agents, and developers can also benefit from professional support, particularly when timelines are tight or when a transaction hinges on project eligibility. Rather than risk a delay or denial, partnering with experienced condo approval specialists can keep deals moving forward.
Final Thoughts
FHA and Conventional condo reviews may serve similar purposes, but the differences between them can have significant implications for buyers, sellers, HOAs, and lenders. FHA reviews are essential for expanding access to homeownership, while Conventional reviews provide speed and flexibility for well-qualified buyers.
Understanding these differences is key to avoiding financing delays and making informed decisions about your condo project. Whether you’re looking to certify a new development, expand financing options for a community, or ensure a smooth closing for your buyer, choosing the right review path is critical.
If your community or condo project needs to be reviewed for FHA or Conventional financing eligibility, don’t leave it to chance. Make sure your documentation, budget, and structure are ready for the scrutiny lenders require.
Looking to streamline the process and avoid costly mistakes? Connect with Condo Approval Professionals and get expert guidance tailored to your project. With proven condo review services, we’ll help you get approved faster and open the door to better financing opportunities for your buyers.