Financing a Condo 101

Condos can be smart investments – but financing them is trickier than financing a single-family home. Lenders see condos as higher risk, so the approval process is more complex and includes a condo-specific review.

Why condo financing is different

Lenders don’t just evaluate you – they evaluate the entire building. They want to know you can repay the loan and that the property won’t lose value or create excessive risk.

1. Finding a Lender for Your Condo Loan

Most lenders have specific rules for condos, whether you’re using:

• FHA or VA loans (government-backed)

• Conventional loans (not government-insured, though some require PMI)

Your lender will review:

• Your income, credit and debt

• The financial and physical condition of the condo building

Why it’s tougher: With a house, the lender mostly checks value and title. With a condo, they also need to be sure the building’s finances, occupancy and governance don’t create risk in a default situation.

Tips for speeding up approval

• Work with a lender experienced in condo loans

• Request condo docs from the HOA early

• Ask the lender whether the building is already FHA/VA approved

2. What Lenders Review in a Condo

The underwriting process digs deeper than typical home loans. Key factors include:

HOA financial health

Lenders check whether:

• Owners are paying monthly dues

• There are foreclosures in the building

• The HOA has sufficient reserves

Missed dues or lots of foreclosures = big red flags.

Owner-occupancy rate

More owner-occupied units = more stable building value.

Legal and governance documents

Lenders analyze bylaws, rules, budgets and reserve studies to spot anything that could cause future issues or depreciation.

3. Financing with FHA or VA Loans

These loans attract first-time buyers for good reason:

• FHA: as little as 3.5% down

• VA: 0% down for eligible buyers

But not all condos qualify.

FHA requires:

• At least 50% owner-occupancy

• Less than 15% of units with dues late more than 60 days

VA approval is similar and is processed through the Department of Veterans Affairs.

4. Financing with Conventional Loans

Conventional loans have stricter credit requirements:

• Minimum credit score: 620 (higher scores = better interest rates)

• Down payment: As low as 3% (varies by lender)

Full condo review (if putting <10% down)

The lender will:

• Collect condo documents

• Review legal/occupancy policies

• Order a condo questionnaire (typically comes with a fee)

Limited condo review (if putting ≥10% down)

Less paperwork, fewer requirements. The lender mainly asks:

• Is the HOA stable?

• Is it new construction or existing?

• Is there litigation?

• Does one entity own more than 10% of units?

Bottom line: Buying a condo is a big life move – and financing works differently than traditional home loans. Decide early whether a conventional, FHA, or VA loan fits your needs, and be ready for the building itself to be part of the approval.

Ready to start your condominium buying journey? NewHomeSource is the best resource for comprehensive new home listings.

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