Condo Financing Guide: Mortgages for Condominiums

Condominiums offer an attractive entry point into homeownership, especially in urban areas where single-family homes may be out of reach. However, financing a condo comes with unique considerations that differ from traditional home purchases. This guide covers everything you need to know about condo financing.

What Makes Condo Financing Different?

When you buy a condo, you're purchasing:

Your individual unit
A share of common areas
Membership in the homeowners association (HOA)

This shared ownership structure creates additional requirements for mortgage approval that protect both you and your lender.

Condo Approval Requirements

Warrantable vs. Non-Warrantable Condos

Warrantable Condos (Easier to Finance):

At least 51% owner-occupied
No single entity owns more than 10% of units
HOA budget is properly funded
No ongoing litigation
Adequate insurance coverage

Non-Warrantable Condos (Limited Financing):

New constructions with unsold units
Condo-hotels or resort properties
Significant commercial space
Delinquent HOA dues exceed 15%

Best Loan Programs for Condos

FHA Loans for Condos

Requirements: Condo must be FHA-approved
Down Payment: 3.5% minimum
Benefits: Lower credit requirements
Check Status: HUD Condo Approval Database

Learn about FHA loans →

VA Loans for Condos

Requirements: VA-approved condo project
Down Payment: 0% down possible
Benefits: No PMI required
Eligibility: Veterans and active military

Explore VA loans →

Conventional Loans for Condos

Requirements: Fannie/Freddie guidelines
Down Payment: 3-5% minimum
Benefits: No upfront mortgage insurance
Flexibility: More non-warrantable options

View Conventional options →

HOA Considerations

Financial Health Indicators

Reserve Funds: At least 10% of budget
Delinquency Rate: Under 15%
Budget Review: No deficits
Special Assessments: Planned improvements

Questions to Ask:

What are monthly HOA fees?
What do fees cover?
Any special assessments planned?
How often do fees increase?
What's the reserve fund balance?

The Condo Review Process

1. Project Questionnaire

The HOA completes a detailed questionnaire covering:

Financial statements
Insurance policies
Ownership percentages
Pending litigation
Budget information

2. Document Review

Lenders review:

CC&Rs (Covenants, Conditions & Restrictions)
Bylaws
Meeting minutes
Financial statements
Insurance declarations

3. Approval Types

Full Review: Complete analysis (2-3 weeks)
Limited Review: Streamlined process
Spot Approval: Single unit approval

Condo Financing Costs

Additional Fees

HOA Questionnaire Fee: $100-300
Condo Cert Fee: $150-400
Transfer Fees: Varies by HOA
Move-in Fees: $200-500

Monthly Costs

Mortgage payment
HOA dues
Property taxes
Homeowners insurance
Special assessments

Insurance Requirements

HO-6 Policy (Walls-In Coverage)

Covers:

Personal property
Interior walls and fixtures
Personal liability
Additional living expenses

Master Policy Review

Ensure HOA's master policy includes:

Building exterior
Common areas
Liability coverage
Adequate dwelling limits

Tips for Condo Buyers

Do Your Homework

Review HOA meeting minutes (2 years)
Check for pending assessments
Understand rental restrictions
Know pet policies
Review parking arrangements

Red Flags to Avoid

Excessive investor ownership
Multiple units for sale
Deferred maintenance
Underfunded reserves
Ongoing litigation

Questions for Current Owners

How responsive is the HOA?
Any issues with neighbors?
How are maintenance requests handled?
Would you buy here again?

New Construction Condos

Special Considerations

Developer must sell 70% of units
Presale requirements
Construction warranties
HOA transition timing

Financing Options

Developer preferred lenders
Construction-to-perm loans
Rate lock considerations
Closing timeline flexibility

Investment Condo Financing

Stricter Requirements

25% down payment typical
Higher interest rates
Lower debt-to-income limits
Cash reserve requirements

Rental Considerations

HOA rental restrictions
Property management rules
Rental cap limitations
Airbnb/short-term policies

Making an Offer on a Condo

Include Contingencies For:

Financing approval
Condo project approval
HOA document review
Home inspection
Insurance availability

Negotiation Points

Seller pays HOA transfer fees
Closing cost assistance
Home warranty inclusion
HOA dues credit

Common Condo Financing Mistakes

Not Checking HOA Health Early
- Review finances before making offer
- Avoid surprises during underwriting
Ignoring Total Monthly Costs
- Factor in HOA dues
- Plan for assessment increases
Skipping Document Review
- Read all HOA documents
- Understand all restrictions
Overlooking Insurance Gaps
- Ensure adequate coverage
- Understand master policy limits

Ready to Finance Your Condo?

Our team specializes in condo financing and understands the unique requirements. We'll guide you through the approval process and help you find the best loan program.

Take Action:

Get Pre-Qualified - Know your budget before shopping
Calculate Payments - Include HOA dues in estimates
Ask an Expert - Get answers to your condo questions

FAQs About Condo Financing

Q: Are condos harder to finance than houses? A: They can be more complex due to HOA requirements, but with proper preparation, the process is manageable.

Q: Can I buy a condo with bad credit? A: FHA loans accept credit scores as low as 580, making condo ownership possible even with credit challenges.

Q: What if the condo isn't FHA approved? A: You can pursue conventional financing, seek single-unit approval, or work with portfolio lenders.

Q: How much should I budget for HOA fees? A: HOA fees vary widely from $200-800+ monthly. Factor this into your affordability calculations.

Q: Can I rent out my condo? A: Check HOA bylaws for rental restrictions. Many associations limit the percentage of rental units.

Ready to buy a condo? Our condo financing experts are here to help. Start your application or schedule a consultation today.