How can I finance a condominium?
There are different rules and programs when financing a condominium. The rates and terms will be different than purchasing a single family home or townhome. Although conventional financing is readily available for existing condos buyers seeking FHA and VA financing will only qualify if the entire condo project has been approved. Most condo projects do not have this approval and are not eligible for FHA/VA loans. Here is a summary to help you decide if a condominium is right for you.
Condominium financing (existing condo, not new construction):
An existing condominium is defined as a condominium that is no longer under developer control and has been turned over the homeowner’s association (HOA). The amount that can be financed will depend on occupancy and the financial condition of the HOA. In most cases if the condo meets Fannie Mae guidelines the buyer can get financing with as little as 3% down (owner occupied). If the condo does not meet all of Fannie Mae’s guidelines we offer a “limited review” with 25% down (owner occupied) or 30% down (second home). Typically if the condo does not meet Fannie Mae’s guidelines (conventional loan) it is due to one of the following reasons:
- Too many investment properties (more than 30% of the units are rented out). Note: Second homes are not considered as a rental property.
- Project is run like a hotel (daily maid service, nightly maid service, etc).
3 Insufficient insurance coverage or lack of fidelity bond insurance.
4) One investor owns more than 10% of the total number of units.
5) More than 15% of the units are delinquent in paying HOA dues (over 60 days)
6) HOA is involved in substantial pending litigation (minor items like a lien against a homeowner for HOA dues is acceptable).
7) Age restrictions, first right of refusal, or other deed/income restrictions.
A condominium may still be eligible for financing even if it doesn’t meet every requirement; please contact us for details.
New Construction Condominiums:
Condominium projects that are new and still under developer control have different guidelines for conventional financing. In addition to the standard requirements (including the items listed above) there are a few more guidelines that apply for new condos. In most cases a new condo will only be eligible for traditional conventional financing if the developer has obtained Fannie Mae project approval. FHA and VA will only lend in new or existing condominiums if it has obtaining full project approval. If the developer did not obtain project approval while under construction there are very few financing options available. In this case the buyer would either need to pay cash or obtain a “non-conforming” loan (generally has higher interest rates and requires a larger down payment). Please contact us for details.
Once the condo project is completely finished and the developer has turned over the HOA to the owners (typically 90-120 days after completion and all units have been sold) financing may be available on a case-by-case basis. This is called a “spot” approval. Here are a few of the rules for eligibility:
- All amenities must be completed
- HOA in control of the community (no longer run by developer)
- Standard qualification rules for an existing condominium will apply.
Some new condo projects are in the process of obtaining project approval for Fannie Mae (conventional), FHA, and/or VA financing. Please contact us for pending eligibility.
Limited review/streamline condominium financing:
If a buyer is putting 25% down (owner occupied) or 30% down (second home) we may be able to provide conventional financing with less restrictions and documentation. FHA and VA loans do not have a “limited review” option. In many cases condominiums will be eligible for financing using this streamlined program. Since the buyer is putting 25% or more down payment the loan has less risk so there are less rules to follow. This is for existing condominiums only, NOT new construction. Please contact us for details.
FHA/VA financing for condos:
Most condominiums are NOT eligible for FHA/VA financing because the entire project has not gone through the full project approval. This is a lengthy and expensive process requiring hundreds of pages of documentation and exhibits. The buyer will only have conventional financing options (available with as little as 3% down payment). This applies for new and existing condominiums.
Note: If the property is a townhome (the word “condominium” is nowhere in the legal description) we treat it as a single family home and traditional financing for conventional, FHA, and VA loans is available.
Approved condominium projects for Fannie Mae, FHA, and VA:
There are several websites that can be used to look up a condo project to verify if it is already approved for financing. Please refer to these websites:
We also have information for condo projects that are in the process of obtaining project approval. Please contact us for details.
What is the difference between a condominium and a townhome? How does this affect financing eligibility?
If a property has the word “condominium” anywhere in the legal description it’s a condo. A property could look like a townhome (attached structure but otherwise looks like a home) and still be a condominium. There are significant legal differences between the two and the financing options are completely different. Buyers can look up a property to see if it is a condo or townhome (www.bcpao.us and search the property address). Condominiums could be called “ABC Townhome Community” or the HOA could describe the property as a “townhome” but that doesn’t mean it is legally a townhome.
Before submitting a purchase offer please contact us and we will help you identify the correct/legal status and determine the financing options available.
We have decades of experience with financing condominiums and have provided financing for hundreds of condo projects in Brevard County. In addition we are the local experts at obtaining full condominium project approval for Fannie Mae, FHA, and VA. The eligibility rules can change over time so please contact us for details, updates and an overview of what is required to obtain these approvals.