Financing a Condo: What is Important?
Mortgage Approval for Condos
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Lender Requirements: Lenders may have stricter requirements for condo financing, including evaluating the condo association's financial health.
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Condo Approval: Ensure the condo development is on the lender’s approved list, especially for FHA or VA loans.
Association Fees
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Monthly Fees: Condo associations charge HOA fees for maintenance, amenities, and reserves. Lenders factor these fees into your debt-to-income (DTI) ratio.
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Special Assessments: Be aware of special assessments for major repairs or upgrades, which can impact your budget.
Down Payment Requirement & Loan Programs
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Some lenders may require a higher down payment for condos, particularly for non-owner-occupied units or condos in buildings with high investor occupancy.
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FHA or VA Loans: Check with your lender to see if the condo is FHA-approved or VA-certified, if using these loan types.
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Conventional Loans: Typically offer more flexibility for condos in approved developments.
Condo Building Financial Health & Insurance Coverage
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Investigate the condo association’s financial health by reviewing their budget, recent meeting minutes, and reserve fund balance.
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Confirm what the condo association’s master insurance policy covers and what you’ll need to purchase separately (e.g., interior unit coverage or HO-6 insurance).
Investment Potential
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If planning to rent out the condo, ensure the building allows rentals, and check financing options for investment properties, which may require larger down payments or higher interest rates.
- Considering using condo as an Airbnb? Condo's can have very specific restrictions about short-term rentals - ensure all condo association documents are thoroughly reviewed to ensure this would be an option.
To Sum it Up
Financing a condominium (condo) can be different from a loan for a single family home. While the basic principles of obtaining a mortgage loan are similar, there are certain nuances and considerations specific to each type of property.
It’s important to work closely with a knowledgeable loan officer or mortgage broker who understands the nuances of both condo and house loans. They can help you navigate the intricacies of each type of loan, determine the best financing option for your needs, and guide you through the application process.
