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I’m buying a condo. Are there different rules? Feature Image
Posted on June 23, 2020 9 minute read

I’m buying a condo. Are there different rules?

What's in this article?

Does the condo meet certain requirements?
Will an FHA, a VA, or a conventional loan be better for you when buying a condo?
How does Homefinity work with you?
Get Started. Make it home.

You want the benefits and convenience of owning a condo, with a loan process that doesn’t cloud your visions of home.

Condos are often in great locations, with community amenities, and no building or yard maintenance. They’re often less expensive than the average single-family house as well.

These high-quality conveniences are possible because condo complexes are run by Homeowners Associations (HOA). This is also the primary reason why getting a mortgage for a condo differs from other properties, as we must consider your financial standing as well as that of the HOA and condo complex.

To make sure your investment in a condo is a positive one, our Homefinity professionals will help you learn whether the HOA is in good standing and the condo building is in good condition where you’re interested in purchasing a unit.

We’ve outlined the steps to help you understand and prepare both your own finances, as well as information about the condo HOA and building, what loan options to consider, and how to secure the most affordable home loan for your situation.

Where to start before you apply

Are you financially ready?

  • Credit score and income
    Credit score requirements can fluctuate, but we can typically find an appropriate loan program or assist you in improving your score.

    Using a free site like CreditKarma, CreditSesame, or CreditWise can be a quick way to get an idea of how you’re doing with your credit. But, just keep in mind that when you go to qualify for your mortgage we’ll need to request your actual credit report and score, which will give us “official” credit scores and the full details of your credit history.

    When looking at your credit score and monthly budget, pay close attention to the amount of debt you carry compared to the amount of consistent income you earn. This determines your debt-to-income (DTI) ratio, which is your monthly expenses divided by your gross monthly income. If you have enough consistent income to pay the added cost of a mortgage, you are more likely to get approved. To learn more about your DTI ratio and how it will effect your loan talk to one of our loan professionals.
  • Down payment
    As condos can be a higher-risk investment for a lender, you can ease their nerves by making a larger payment on the condo upfront.

    Typically the more money you can put down, the cheaper your ongoing monthly payments will be. If you put less money down, then you may take on higher monthly payments to cover costs such as mortgage insurance premiums.

    The down payment for a condo can range from as low as 3%. If you want to purchase a $150,000 condo, that could mean a payment upfront of about $4,500. This gives you options in deciding what you can afford upfront, compared to what you can afford over the lifetime of the loan.
  • Added fees
    The convenience of the amenities, location, and services included with a condo unit come with additional fees and rules from a Homeowner’s Association (HOA). These fees help to cover costs to maintain the building, community spaces, and association management. The rules maintain uniformity and standards throughout the complex.

On top of your mortgage costs, and home insurance, be sure to factor in the added monthly HOA fee, which can fluctuate over time.

Does the condo meet certain requirements?

Beyond your own financial situation, we will also need to assess the standing of the HOA and condo complex that you’re interested in buying.

The more assistance you need to secure a home loan, the stricter those requirements are for both you and the condo, to ensure that your loan isn’t a risky investment. 

These requirements protect you from purchasing a condo unit that you might later be unable to sell or afford, as this can depend largely on the complex being in good standing.

Considerations include:

  • How much of the condo’s budget is set aside for maintenance and repairs
  • The condo’s insurance coverage, including areas such as hazard, liability and flood insurance
  • How much of the project or complex is owner-occupied, rather than open or renter-occupied
  • Past or pending lawsuits against condo developers or the HOA board
  • What percentage of the complex’s HOA dues are paid on time
  • No restrictions or claims against the property

If a unit or complex does not meet these standards, it doesn’t mean it can’t be purchased, but it might be more difficult or expensive to secure.

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Will an FHA, a VA, or a conventional loan be better for you when buying a condo?

When deciding what loan is best for you, it helps to understand what requirements a condo unit must meet, as well as your own financing. FHA loans and other special loan types, such as VA, involve stricter rules than conventional loans.

Certain condo requirements apply to all loan types, including that a condo must not have pending litigation against the association, as well as rental occupancy of over 50% and a single person owning more than 20% of the units. The condo must also pass an appraisal to show it has enough value and is in good condition for financing.


With federal assistance, we can provide an FHA loan, which allows you to get approved even if you have a low income, credit score, or down payment. The Federal Housing Administration provides insurance to make this possible, as loans like this would otherwise be a riskier investment for lenders.

To help you find a condo that meets FHA requirements, it might help to search the U.S. Department of Housing and Urban Development’s FHA-approved condo list

Your requirements

  • Credit score requirements fluctuate. Connect with your loan officer for specific requirements.
  • Home being purchased will be your primary residence 
  • A required home inspection that meets minimum property standards
  • A mortgage insurance premium paid at closing and monthly mortgage insurance payments, likely for the life of the loan
  • Depending on location, typically for a loan no larger than $314,545 to $726,525 for a single-family home

Condo requirements

  • 50% or more units need to be owner-occupied
  • No more than 50% of the units are FHA-insured and at least 80% of those insured must be owner-occupied
  • No more than 15% of the units can be 60 days late on HOA fees
  • No more than 35% of the building is nonresidential space
  • If newly constructed, the project must be complete for a year without pending additions or phases


If you are active duty or a veteran, you can use your VA benefit to purchase a condo with no money down. This is possible because it is backed by the U.S. Department of Veterans Affairs.

Condos approved by the VA can be purchased with a VA loan. To help you find a condo that meets VA requirements, the Veterans Information Portal has a search tool for finding approved condos.

Your requirements

  • Credit score requirements fluctuate. Connect with a loan officer for specific requirements.
  • Debt-to-income ratio of less than 60%
  • Maintain residual income, or monthly income remaining after all major debts and obligations are paid
  • VA appraisal to estimate the value of the property compared to the price of comparable homes
  • Property’s condition meets VA’s Minimum Property Requirements
  • Depending on location, typically for a loan no larger than $510,400 to $765,600 for a single-family home

Condo requirements

  • 35% or more units need to be owner-occupied
  • No more than 10% of the units can be 60 days late on HOA fees
  • The HOA must provide at least three years of financial records
  • At least 20% of the HOA’s budget must be set aside for maintenance and repair


Although a higher credit score and stricter condo standards are needed to qualify for a conventional loan, it presents more flexibility for determining your down payment, closing costs, monthly payments, and length of your mortgage.

Unlike FHA loans, conventional mortgages are not backed by the government. Instead, they meet the standard down payment and income requirements set by Fannie Mae and Freddie Mac, which help fund the US housing market. Conventional loans also follow limits set by the Federal Housing Finance Administration (FHFA).

Your requirements

  • Credit score requirements fluctuate. Connect with a loan officer for specific requirements.
  • Downpayment of 3% or more, with 5-10% being typical
  • Monthly mortgage insurance payments required if down payment is less than 20% until your loan-to-value ratio reaches 80%
  • Depending on location, typically for a loan no larger than $510,400 to $765,600 for a single-family home

Condo requirements

  • 50% of more units need to be owner-occupied as primary residences or second homes
  • No more than 15% of the units can be 60 days late on HOA fees
  • At least 10% of the condo budget must be designated for maintenance

How does Homefinity work with you?

Now that you understand the different rules that come with purchasing a condo, and what types of loans are available, let’s find out what will work specifically for your situation. Homefinity’s professionals work with you from start to finish to secure the loan you need.

  1. With a phone call to our loan professionals or a convenient online form, you can start the application process, where we’ll ask questions about your credit and finances to learn about your needs.
  2. Your information helps us make the best possible recommendations on what loan options will work best for you, such as whether you qualify for a Conventional, FHA, or VA loan. We’ll discuss the options with you, the condo information required, and any questions you have about your situation.
  3. Once you feel comfortable with choosing your loan, we’ll help you through the approval process. With approval, we can lock in your interest rate so it won’t fluctuate throughout the process.
  4. As you head toward closing your loan, we’ll guide you through every step, updating you at each point in the process with clear details and next steps. Your dedicated loan officer can answer your questions at any time.
  5. When you’re ready, we can close your loan on the day, time, and place that works best for you so you can get into your new home.

Get Started. Make it home.

Connect with a dedicated loan officer to discuss how the rules for buying a condo apply to your situation. Apply online or over the phone to start the approval process so that you can feel comfortable with your loan when buying the condo you love.

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