source:
  type: guide
  id: hud-4000-1-i-c-post-approval-requirements
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part I — c. Post-approval
    Requirements (07/14/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part I — c. Post-approval
    Requirements (07/14/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-i-c-post-approval-requirements-full
  canonical_id: hud-4000-1-i-c-post-approval-requirements-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part I — c. Post-approval
    Requirements (07/14/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part I — c. Post-approval
      Requirements (07/14/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'c. Post-approval Requirements (07/14/2025) Governmental Entities
      and HUD-approved Nonprofits must comply with the following requirements and
      restrictions for its FHA business operations in addition to continuing to operate
      in full compliance with the eligibility requirements outlined in this Handbook
      4000.1. i. Consultant Services Consultant Services provided under an independent
      contractor relationship (as opposed to an employer-employee relationship) must
      not constitute more than half of the nonprofit’s activities in the operation
      of its FHA-approved programs. This measurement will be calculated by evaluating
      the ratio of nonprofit staff to contracted or consultant staff; the ratio of
      hours devoted to the implementation of the AHP by nonprofit staff versus contracted
      or consultant staff; and the funds devoted to paying nonprofit staff compared
      to those paying contracted or consultant staff. The nonprofit must have the
      in-house resources and capacity to run its own programs, and contract for services
      on a temporary and supplementary basis. Therefore, to ensure that the consultant
      services are provided on an arm’s length basis, the nonprofit must disclose
      any written and/or side agreements with parties that may derive financial gain
      through the homeownership program. Disclosure must identify the name of the
      business entity, and the individuals from the company who will be working with
      the nonprofit, the terms of the relationship and how the party will be compensated.
      Failure to adequately disclose may result in a conflict-of-interest determination.
      The nonprofit must contact FHA immediately if more than half of the nonprofit’s
      activities are provided by consultants under an independent contractor relationship
      at any time during the approval period. ii. Limitation on the Number of 203(k)
      FHA-Insured Mortgages A nonprofit is prohibited from further borrowing under
      its FHA Mortgagor approval if the nonprofit has 10 or more incomplete 203(k)
      developments at any given time. I. DOING BUSINESS WITH FHA B. Other Participants
      4. Nonprofits and Governmental Entities Handbook 4000.1 110 Last Revised: 11/26/2025
      Exceptional Performance Waiver Nonprofit agencies with an exceptional performance
      record of successfully completing 203(k) developments (defined as those agencies
      that have successfully completed 20 or more 203(k) developments) may apply to
      FHA for a waiver of the limitation on 203(k) Mortgages. This waiver request
      must contain a narrative describing the nonprofit agency’s homeownership or
      long-term rental program; current audited financial statements with an unqualified
      opinion from a CPA for the prior three years; a listing of all Properties currently
      owned by the nonprofit agency (both conventional and government financed); a
      record of performance on all 203(k) Mortgages (current as well as previous Loans);
      as well as the evidence to support the sale or rental of these Properties. Nonprofit
      agencies that are approved for this waiver, for financing for more than 10 203(k)
      Mortgages at one time, will have it stated in their approval letter from FHA.
      iii. HUD Homes – Name and Address Identification (A) Standard In order to bid
      on Real Estate Owned (REO) Properties, a nonprofit must obtain a Name and Address
      Identification (NAID), after it receives an approval letter from HUD to participate
      in the HUD Homes Program. To obtain an NAID, a nonprofit must submit the required
      documentation through the online NAID application portal at the HUD Home Store.
      (B) Required Documentation The nonprofit must submit the IRS Letter of Determination/Ruling
      and HUD Nonprofit Approval Letter. iv. HUD Homes – Individual Property Files
      (A) Definition Individual Property Files refer to files that Governmental Entities
      and HUD-approved Nonprofits participating in the HUD Homes program must maintain
      for each Property purchased, sold, or leased when a discount of 10 percent or
      greater is obtained at the time of purchase. (B) Standard Governmental Entities
      and HUD-approved Nonprofits must submit the Individual Property Files to FHA
      through the NPDMS no later than 60 Days after the resale of a Property to a
      subsequent homebuyer. Governmental Entities and HUD-approved Nonprofits must
      contact the FHA Resource Center at answers@hud.gov, notifying them when an Individual
      Property File is ready for review. Individual Property Files I. DOING BUSINESS
      WITH FHA B. Other Participants 4. Nonprofits and Governmental Entities Handbook
      4000.1 111 Last Revised: 11/26/2025 are ready for review once all data has been
      entered and supporting documentation has been uploaded. The Individual Property
      File must be maintained for a minimum of three years after the Property is sold
      by the nonprofit. (C) Required Documentation The Individual Property File must
      include all supporting documentation for NDCs. The supporting documentation
      includes the following: • copies of the fully executed Closing Disclosures or
      similar legal documents for the nonprofit’s purchase from HUD and from the nonprofit’s
      resale of the Property to the new purchaser; • a copy of a signed Land Use Restriction
      Addendum (LURA); • income verification for the purchaser who bought from the
      nonprofit. This may be in the form of pay stubs; Verification of Employment
      (VOE); the most recent IRS Form W-2, Wage and Tax Statement; or Tax Returns.
      Nonprofits must also provide a certification that the resale purchaser’s income
      was at or below 115 percent of HUD’s determination of median income for their
      area when adjusted for family size; • appraisal reports if the Property was
      purchased as a 203(k) or financed with 203(b) or other FHA insurance funds;
      • rehabilitation documents must include: o Work Write-Up/contractor estimate
      of repair costs o change orders o inspection of repairs by nonprofit o invoices
      from contractors o copies of payments to contractors • additional rehabilitation
      documents for 203(k) must include: o draw requests o Lien Waivers o Final Release
      Notice • if the Property is leased under an approved lease/purchase program:
      o copies of executed lease o income verification o evidence of proactive work
      of nonprofit to move tenants into homeownership o appraisal or document from
      independent third party to determine fair market rent o list of other program
      costs, including developer’s fees Accounting records must be maintained in a
      property-specific format so that cost calculations can be made for all expenses
      related to each specific Property. I. DOING BUSINESS WITH FHA B. Other Participants
      4. Nonprofits and Governmental Entities Handbook 4000.1 112 Last Revised: 11/26/2025
      In addition, Governmental Entities and HUD-approved Nonprofits must submit a
      list of all business partners participating in the acquisition, rehabilitation
      and resale of the Property. The list must include the name of the company, the
      name of the principals, the name and title of all staff with whom the nonprofit
      is working, a description of the services provided by the company, and an accounting
      of the costs and fees associated with those services. This information must
      be reported for all real estate agents, Lenders, and contractors involved in
      the acquisition, rehabilitation and sale of the HUD Homes Property. (D) HUD
      Homes – Net Development Costs The NDCs are composed of the allowable property
      Acquisition Costs plus allowable rehabilitation, holding, and selling costs
      which Governmental Entities and HUD- approved Nonprofits incur when purchasing
      HUD Homes at discounted prices, redeveloping the Properties for resale, and
      selling those Properties. The NDC calculation applies to all HUD Homes sold
      to nonprofit organizations and Governmental Entities at a 10 percent or greater
      discount regardless of the source of the financing (FHA, conventional Mortgage,
      or cash), except for discounted REO homes purchased through the Dollar Home
      Sales to Local Governments, Asset Control Areas (ACA), and Good Neighbor Next
      Door (GNND) programs. The purpose of these discounts and the limits on development
      costs is to make housing affordable to Low- to Moderate-Income families. HUD
      limits the costs that are eligible to be included in the NDC calculation and
      prohibits the nonprofit organization or Governmental Entity from reselling the
      repaired or improved Properties at prices in excess of 110 percent of the NDC
      calculation. If the nonprofit organization’s or Governmental Entity’s resale
      price of the HUD Home exceeds 110 percent of the NDC, or if non-allowable items
      that are included in the NDC result in an excessive sales price, the HUD-approved
      Nonprofit or Governmental Entity must use the excess profit to pay down the
      existing Mortgage associated with that particular resale. (1) Costs Allowed
      in Calculating the Net Development Costs Only the costs specifically included
      in the following list, within the prescribed limitations and/or conditions,
      may be included in calculating the NDCs: • the discounted purchase price paid
      to HUD; • upon the purchase of the Property from HUD, prepaid items and financing
      and closing costs actually incurred, which must be reasonable and customary
      for the area in which the Property is located; • for the time period the nonprofit
      organization or Governmental Entity holds title, the following costs, limited
      to amounts that are reasonable and customary for the area in which the Property
      is located, may be included: o fees paid to an approved 203(k) Consultant for
      Work Write-Ups, Cost Estimates, and inspections only; I. DOING BUSINESS WITH
      FHA B. Other Participants 4. Nonprofits and Governmental Entities Handbook 4000.1
      113 Last Revised: 11/26/2025 o property management, but only if related to periodic
      inspection and/or minor maintenance of the Property; o architectural fees, but
      only if the services are provided by a licensed architectural firm or individual
      architect; o rehabilitation costs, which are the total verifiable contractor
      and vendor expenditures incurred in the actual reconstruction, repair, restoration,
      and physical improvement of the Property. Rehabilitation costs are limited to
      the actual price paid to the contractor for completing each repair or improvement,
      and may also include expenditures for mechanical systems inspections, sewer
      and well inspections, repair inspections, foundation certifications for Manufactured
      Housing obtained from a licensed engineer, and roof inspections from a licensed
      contractor. HUD may require canceled checks and corresponding receipts as proof
      of rehabilitation costs. When calculating the NDC, Governmental Entities or
      HUD-approved Nonprofits using grant funds for the rehabilitation of HUD Homes
      acquired at a discount, cannot include the cost of the rehabilitation that is
      paid for by those grant funds; o cost of public and municipal services and utilities
      and real property taxes for the subject premises, except for delinquent interest
      or penalty charges incurred as a result of failure of program participant to
      pay these expenses in a timely manner; o cost of termite inspection and extermination
      services; o Homeowners’ Association (HOA) or Condominium Fees; o permits and
      other fees paid to units of state and local governments that are required by
      rule, law, regulation, or other legally binding mandate that must be paid before
      initiating or completing the rehabilitation or property improvement; o survey
      costs; o hazard and liability insurance premiums; and o interest portion of
      Mortgage Payments limited to a maximum of 18 months’ interest payments, less
      any and all rents received. If the Property is resold in less than 18 months,
      the interest payment credit must be pro-rated on the basis of the actual payments
      made – rent received and interest paid would be allowable costs but not the
      principal; and • upon the resale of the Property to a new purchaser, only the
      following seller closing costs that are actually incurred, limited to amounts
      that are reasonable and customary for the area in which the Property is located,
      may be included: o ½ of closing agent fee (seller’s portion); o electronic wiring
      fees; o courier and mailing fees (seller’s documents only); o title insurance
      premium (owner’s policy only); o state, county, or city tax stamps, if local
      law requires the seller to pay these costs; I. DOING BUSINESS WITH FHA B. Other
      Participants 4. Nonprofits and Governmental Entities Handbook 4000.1 114 Last
      Revised: 11/26/2025 o homeowners warranty premium; o environmental hazard certification;
      o document preparation fee (seller’s documents only); o recording (deed only)
      and reconveyance fees; o sales commissions for real estate broker/agent services;
      and o condominium transfer fee. (2) Costs Not Allowed in Calculating the Net
      Development Costs Costs not listed in Costs Allowed in Calculating the Net Development
      Costs are ineligible and cannot be included in the NDC calculation. Ineligible
      costs include: • general administration cost of the nonprofit organization’s
      or Governmental Entity’s AHPP and homeownership programs, including overhead
      and staffing costs; • housing developer fees and/or real estate consultant fees;
      • sales bonuses and sales incentives (other than sales commissions) for selling
      or listing real estate brokers/agents; • Gifts to the Low- to Moderate-Income
      purchaser for downpayment, financing or closing costs, prepaid items, and any
      other purchaser-related expenses associated with their purchase of the Property;
      • development, maintenance, and management costs related to other Properties
      in the nonprofit organization’s or Governmental Entity’s inventory; • delinquent
      property tax or utility penalties and interest; and • Mortgage Payment late
      fees, prepayment penalties, payoff quote fees, and fax charges. (E) HUD Homes
      – Land Use Restriction Addendum (1) Definition The Land Use Restriction Addendum
      (LURA) is a legally binding contractual agreement between HUD and the Governmental
      Entities or nonprofits imposing restrictions on the resale of a HUD Home that
      the nonprofit organization or Governmental Entity purchased at a discount of
      10 percent or greater. (2) Standard Governmental Entities and HUD-approved Nonprofits
      participating in the HUD Homes program must execute the LURA as part of the
      FHA sales contract for any Property purchased at a 10 percent or greater discount.
      The LURA terminates five years from the date of execution. The LURA requires
      the purchaser to expand affordable housing opportunities by complying with the
      following requirements: I. DOING BUSINESS WITH FHA B. Other Participants 5.
      Real Estate Brokers Handbook 4000.1 115 Last Revised: 11/26/2025 • The purchaser
      must complete needed repairs to bring the Property into compliance with local
      housing code followed by resale, lease, or lease purchase only to a person who
      intends to occupy the Property as their Principal Residence and whose income
      is at or below 115 percent of the median income in the area, when adjusted for
      family size, or state, Governmental Entity, tribe, or agency thereof. • If sold,
      the purchaser must resell the Property for an amount not in excess of 110 percent
      of the NDCs. The NDCs are the total HUD-allowable costs to purchase, rehabilitate,
      and resell the Property. • The Property may not be occupied by or resold to
      any of the purchaser’s officers, directors, elected or appointed officials,
      employees, or business associates, either during their tenure or for one year
      thereafter, or to any individual who is related by blood, marriage, or law to
      any of the above. • There may be no conflict of interest with individuals or
      firms that may provide acquisition or rehabilitation funding; management, sales
      or rehabilitation services; or other services associated with the Property.
      The Governmental Entity or HUD-approved Nonprofit must provide periodic reports,
      in the format and frequency specified in the HUD Homes – Individual Property
      Files section. Exception Discounted homes purchased through the Dollar Homes
      Sales to Local Governments, GNND and ACA programs are not subject to the LURA
      restrictions. 5. Real Estate Brokers'
  judgment: false
