Obtaining a mortgage for the purchase or refinance of a Condo is a unique process. Mainly, the difference is the condo project and HOA are reviewed by a lender for eligibility.
Mortgage for a Condo
Financing a condo differs from financing any other type of residential property. Primarily, the HOA / condo project must be deemed eligible for financing by a mortgage lender. Our Condo page explains more on the following condo financing topics:
- Condo Financing Differences
- Condo Financing Eligibility
- Condo Approval Conventional, FHA, VA and USDA
- 3 Keys to Condo Home Loan Approval
- General Condo Financing Rules
Condo Financing Differences
In short, financing the purchase or refinance of a condo requires a review of the condo’s HOA. In fact, this makes up the sole difference between financing a condo and financing non-condo residential property.
While each loan type’s condo rules vary, all home loans have one common thread regarding condo financing. The HOA / condo project must be deemed “ELIGIBLE” for financing in order to obtain a home loan.
Mortgage Eligibility means something different in the context of a condo compared to other property types. Non-condo properties also must meet basic rules. However, the scope of property eligibility stretches much further for condos.
Condo Eligibility for Financing
Due to the legal shared ownership structure of condo’s, the HOA / condo project is important to lenders. In other words, mortgage lenders care about the unit being purchased along with the HOA it belongs to.
In short, were the HOA to fall apart or fail the unit financed by a lender becomes more likely to foreclose. Similarly, should units in the project become uninhabitable the lender’s stake in the unit financed starts to weaken.
Condo mortgage eligibility differs based on loan product and investor. For example, Conventional loan condo requirements and FHA loan condo requirements are not the same. In fact, even Fannie Mae and Freddie Mae vary from one another.
Condo Approval by Home Loan Type
3 Steps – Condo Home Loan Approval
The final loan approval process differs when financing a condo. Here is an outline to help you better understand those differences and to feel comfortable with the overall condo home loan process.
- Obtain Mortgage Pre-Qualification
Like any other loan and property type, pre-qual is the starting point.
- Condo Project / HOA Eligibility Review
Once under contract on a condo, we work with you and the HOA to determine the financing eligibility of your condo. Typically, doing this prior to appraisal and inspection makes the most sense.
- Combine Loan Approval with Condo Approval
On condo purchase or refinance transactions, complete final approval occurs when the condo / HOA is deemed eligible for financing AND the borrower’s loan application (“credit app”) are both approved.
3 Steps Vary by Loan Type
STEP 2 varies based on loan type, down payment amount and occupancy. From down payment and occupancy to which loan product used the condo review process looks different across each scenario.
The HOUSE Team guides each condo client through the process pertaining to their unique home loan scenario.
General Condo Rules
A borrower’s loan type (JUMBO, Conventional, VA, FHA or USDA) and occupancy dictate the process lenders follow for condo approval. For example, the following often factor into condo eligibility:
- Pending litigation
- HOA’s blanket insurance policy
- Single Entity ownership
- The completion status of the project
Documents Needed for Condo Home Loan
While the documents required for condo approval, mortgage lenders typically request some variation of the following. However, it is important to note not all these documents are needed for every condo transaction. Conversely, certain condo transactions require more than the following documents.
- Condo questionnaire
- HOA blanket Insurance policy
- Copy of the HOA’s annual budget
Typically HOA’s charge a borrower for the above documents. While those charges range, typically we see HOA’s charge $100 to $500 for these documents.