Getting a mortgage for a condominium is more complicated than getting a mortgage for a single family home because there are more moving parts to a condominium. On a condo a mortgage lender has to analyze the annual budget, the reserve account, the master insurance policy, and much more. Please note that condo mortgage underwriting guidelines can change at any time.
Information On Various Condos
Conventional Mortgage Financing For Condominiums
Some of the important things to look for in a condominium when getting a conventional mortgage:
- The condo HOA should not be undergoing any litigation against itself.
- Check delinquency rates for monthly HOA dues.
- Is there a special assessment pending or active? That may be a problem.
- There should be a satisfactory annual reserve account contribution in the budget.
- Is there any commercial space in the condo? If so what is the percentage of commercial space compared to the total square footage of the condo?
- Does one owner or entity own multiple units in the building? If so there are rules related to limits on this scenario.
Those are the important basics that will be looked at when getting a conventional mortgage on a condo, but there is much more to know.
**IMPORTANT UPDATE FOR 2022**
Financing for condos has gotten a little more difficult due to the condo collapse in Surfside FL, and the subsequent fears about structural issues in condos. Click here to read more details on this.
VA Mortgage Financing For Condominiums
You can use your VA eligibility to get a VA mortgage on a condominium. However, the condominium has to be on the “VA approved condo” list. This is a list of condominiums that have gone through the VA approval process which VA deems acceptable for VA mortgage financing.
This list is regularly updated, so know that it changes. It is possible for a condominium to get VA condo approval but then later lose that approval or have it expire. Once the approval is achieved it needs to be maintained and renewed. You need to check and make sure that the condominium is still on the VA approved condominium list.
You may have found a condominium that you’re interested in here on my website, but if you are interested in getting a VA mortgage you also need to double check the online VA approved condo list.
Click here to get access to the “VA approved condo” list . You need to confirm with 100% certainty that the condominium is still on the VA Approved condo list, and hence eligible for VA financing. You can watch the below video to see how to use the online “VA approved condo” search tool.
After you have confirmed that the condominium that you are interested in is eligible for VA mortgage financing, then you should pursue getting pre-approved for a VA mortgage. After ensuring that the condominium is on the VA approved condo list the traditional VA mortgage guidelines apply.
You can click here to see VA mortgage guidelines if interested.
And you can click here to see what your VA funding fee would be. For more information on the VA funding fee and what it is and why it exists, click here.
FHA Mortgage Financing For Condominiums
You can use FHA financing to get a mortgage loan on a condominium. However, the condominium has to be on the “FHA approved condo” list. This is a list of condominiums that have gone through the FHA approval process and FHA deems them acceptable for FHA mortgage financing. You can watch the below video to see how to use the online “FHA approved condo” search tool.
This list is regularly updated, so know that it changes. It is possible for a condominium to get FHA condo approval but then later lose that approval or have it expire. Once the approval is achieved it needs to be maintained and renewed. You need to check and double check and make sure that the condominium is still on the FHA approved list.
And as of March 2021 FHA allows “single unit approvals”, which used to be called “spot approvals”. This means FHA will consider doing an FHA mortgage in a condo that is not on the FHA Approved Condo list. However, there are a lot of requirements for a condo to meet in order for FHA to approve a single unit approval. Some of the main requirements are:
- The certificate of occupancy have to have been issued at least 1 year ago, or subject has been occupied
- The condo project has at least 5 units
- It is not a manufactured home
- It is not ineligible based on all the FHA condo guidelines
- Unit owners must be in control of the association
- Owner occupancy of at least 50%
- Current Budget has a reserve allocation of at least 10%
- No more than 15% of the unit owners can be delinquent on condo dues.
- Individual unit ownership: buildings with 20 units or more one owner can own 10% or less of the units.
Buildings with less than 20 units – unit owners can only own 1 unit and no related party may own a unit - Condo budget cannot rely on any commercial or non-residential income
In Closing…
You may have found a condominium that you’re interested in here on my website, but you also need to double check the online FHA approved condo list seen by clicking here.
After you have confirmed that the condominium that you are interested in is eligible for FHA mortgage financing, then you should pursue getting pre-approved for an FHA mortgage.
After ensuring that the condominium is on the FHA approved condo list the traditional FHA mortgage guidelines apply. You can click here to see FHA mortgage guidelines if interested.
While FHA and VA mortgage financing options have benefits, you should compare your options compared to a Conventional loan as well.