Navigating FHA Approval for 2-4 Unit Condos: Tips and Insights for Buyers and Sellers

Chad Rankin / May 9, 2023 / Expert Articles

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FHA Approval for 2-4 Unit Condos: A Comprehensive Guide

Are you considering purchasing a 2-4 unit condo and wondering about the FHA approval process? Look no further! In this guide, we will cover the key aspects of obtaining FHA approval for 2-4 unit condos, including the importance of working with the seller and listing agent to make the process as smooth as possible. This information comes directly from Chad Rankin of the Rankin Mortgage Team in Worcester, Massachusetts, who has extensive experience with these types of properties.

The Unique Aspects of 2-4 Unit Condos

Unlike traditional condo projects, 2-4 unit condos do not require a homeowners association (HOA) or an HOA fee. However, there is a memorandum of understanding needed between the owners to establish shared responsibilities and costs. This is especially important when it comes to things like maintenance, shared walls, and common areas.

Master Insurance Policy Requirements

A master insurance policy is crucial for 2-4 unit condos to protect all parties involved. This policy covers shared spaces and can help prevent potential legal issues between neighbors. Additionally, each unit owner should have an HOA-6 policy for interior contents coverage.

No Budget or Reserve Requirements

Since 2-4 unit condos are considered lower risk, there is no budget or reserve requirement for FHA approval. This is a significant advantage for potential buyers, as it simplifies the approval process.

Limitations on Investor Ownership

To be eligible for FHA financing, no more than 50% of the units in a 2-4 unit condo can be owned by investors. Additionally, the seller of the property you are buying cannot be an investor.

The Importance of an Attorney Opinion Letter

An attorney opinion letter is required to confirm that all recorded documents meet state, local, and HUD guidelines. This step is crucial for FHA approval, and it is essential to work with an experienced attorney who can draft this letter properly.

Conversions and HUD Approval

If the 2-4 unit condo project was converted from a different type of building within the last two years, HUD approval may be required. However, if the conversion took place more than two years ago, this step can be bypassed.

Real-Life Examples of the FHA Approval Process

Chad shares two examples of recent FHA approvals for 2-4 unit condos in Massachusetts. In both cases, the properties needed to meet specific requirements, such as having a master insurance policy, a memorandum of understanding, and an attorney opinion letter. With these elements in place, the properties were successfully approved for FHA financing.


Obtaining FHA approval for 2-4 unit condos can be a straightforward process if you understand the key aspects involved. By working with experienced professionals like Chad Rankin and the Rankin Mortgage Team, you can successfully navigate the FHA approval process and secure financing for your dream condo. If you have any questions, don't hesitate to reach out for assistance!

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Chad Rankin

Hi, I'm a mortgage expert living in Massachusetts. I am also licensed to help with your home loan in several other States across the Country. Do you have mortgage questions? How can I help? View Profile

Chad Rankin NMLS # 490282 Senior Loan Officer 324 Grove Street Worcester, MA 01605 (508) 928-4141

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About Chad Rankin

Hi, I'm a mortgage expert living in Massachusetts. I am also licensed to help with your home loan in several other States across the Country. Do you have mortgage questions? How can I help?