Conventional financing requirements for condos
If you're applying for a conventional (non-FHA) mortgage on a condo, the requirements vary based on your lender, the size of your down payment, and more. The condo concerns I discussed a couple of sections ago generally apply to conventional financing, but some of the FHA rules don't. For example, you can use a conventional mortgage to buy a condo that's still under construction or was recently completed. And if you want to buy a condo as a vacation home or investment property, a conventional loan is the way to go. As I mentioned, the exact requirements can vary. Even so, I'd suggest planning on the lender wanting:
- at least 50% owner-occupancy in the complex,
- at least 90% of the units to be occupied (no bank wants to finance a condo in a half-empty community), and
- no more than 15% delinquency in condo association dues.
Lenders want to know that the association dues aren't likely to skyrocket due to non-payment by other owners or financial insolvency. They also want to know that the building is going to be well taken care of. After all, if you can't make your loan payments, the condo will become the bank's problem. Lenders want to protect themselves.
The bottom line
The main difference between financing for condos and single-family homes is that there are two things that need to qualify for financing -- you and the condo building itself. The qualification standards for you are generally the same, no matter what type of home you're buying. You'll still need an adequate down payment, enough income to justify the loan, and stable employment, for example. However, you can expect the condo and its association to be put through a rigorous approval process. That process could prevent you from getting financing, even if you're an otherwise well-qualified applicant.