Condo “Walls-In” (HO-6) Hazard Insurance Now Being Required for FHA Loans Condo Loans

In the past if you obtained a FHA loan on a condo it wasn’t required for you to have an individual homeowner’s insurance policy (as it is on single family homes).  But this has changed and FHA lenders are now requiring borrowers to obtain a 12 mos “walls-in” insurance coverage policy equal to at least 20% of the subject properties appraised value.  If the master or blanket insurance policy held by the condo HOA covers fixtures and equipment inside each unit, you will not need to obtain a “walls-in” policy.  But most condo project master policies do not include this.

FHA lenders at this time are not adding the cost of this insurance into a borrowers qualifying housing payment for a condo purchase.  But with conventional loans, lenders are starting to add this into the qualifying housing payment.  The yearly homeowners insurance policy divided by 12 is included in the borrowers housing payment for qualification. 

So when you are getting approved for a FHA loan for a condo purchase, keep in mind that you will probably need “walls-in” insurance coverage before the lender will fund your loan.  You will need to pay for a full year policy up front, so that will be a cost added to your total closing costs.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)


Leave a Reply