While both condominiums and houses may offer shelter from a storm, there are some fairly distinct differences between these types of housing. After all, when you purchase a traditional single-family home, you generally get a free-standing structure and the land that it sits on. When you purchase a condo, you own your unit and share ownership of certain common elements or common areas of the larger building and grounds with the other condo owners in the building. Since condo ownership works differently, it should come as no surprise that the process of getting a mortgage for a condo can also be a little different. Exploring how to get a loan for a condo before you approach a lender will allow you to prepare for the journey.
How to Get a Loan for a Condo
If you want to understand how to get a loan for a condo, then you’ll need to know what lenders are thinking about when they decide whether or not to approve a condo loan. It also helps to know what loan programs allow you to use their loans to purchase a condo.
Borrower Qualifications
With any home loan, you’ll have to show that you have the credit and income to repay the loan. According to MillionAcres, the personal requirements set by lenders are generally about the same whether you are shopping for a loan for a house or a loan for a condo. While the loan program you choose may change the borrower qualifications that you’ll need to meet, setting your sights on a condo won’t. However, no mortgage is ever approved without both the borrower and the property being approved.
Condo Qualifications
As Money Under 30 reports, there are special considerations that a lender has when dealing with condos. After all, a lender is concerned with risk. With a single-family home, the calculations involved in assessing the property’s value and ensuring that the lender can protect itself from significant losses (by selling the property should the borrower default on the loan) are fairly simple. With a condo’s tangle of individual and shared ownership, the calculations are more difficult. Condos require special underwriting because lenders have condo-specific considerations:
- The finances of the homeowners association. Lenders want to see that the HOA is in good financial shape, has the proper insurance, and isn’t in legal hot water.
- The condo documents. Condo associations are governed by legal agreements. If the ones governing this unit raise cause for concern, the lender will be wary.
- The percentage of owner-occupied units. Lenders prefer buildings with owner-occupied units. Too many units that are vacant, rentals, or sold as time-shares could be problematic.
- The number of recent sales. Appraisers rely on comparable sales when assessing property values. If there haven’t been many recent sales, the lender may be hesitant.
- The composition of the building. Some lenders are reluctant to approve loans for condos in condominium buildings that have strong commercial presences. They will only agree to fund purchases in buildings that are primarily residential in nature.
Condo Loan Possibilities
What loan programs allow you to use their loans to purchase a condo? You actually have plenty of possibilities. Each loan program has slightly different requirements, so you’ll want to consider the ins and outs to find the loan that best matches your finances, circumstances, and goals. According to U.S. News and World Report, the following loans can all be used for a condo purchase:
- Conventional loans
- Jumbo loans
- FHA loans
- USDA loans
- VA loans
Buying a condo can be a fantastic way to secure a comfortable home in a great location that comes with more amenities and fewer maintenance demands. As an added bonus, a condo is often more affordable than a single-family home. When you have questions about how to get a loan for a condo, turn to the home loan experts at PrimeLending Dallas. We’re happy to assist you in sorting through your options to find the one that works for your needs. Reach out today to discover how we can help.