Buying a condo is a lot like purchasing a "regular" home,¬†but with¬†one big¬†difference -- mortgages are tougher to come by.
Lenders impose a different set of rules on you when you buy a condo. They may sometimes increase your interest rate.
The most experienced and professional mortgage lenders can help you navigate the condo financing maze. A mortgage lender who's looking out for your best interest can help you beat the system.
With condos and co-ops, it‚Äôs not just your creditworthiness the lender has to worry about. It must also¬†verify¬†the fiscal and physical health of the entire development into which you're buying.
Fortunately, with the housing market in recovery and¬†condo values climbing, mortgage lenders allow looser guidelines¬†-- even low-downpayment home loans.
Expect condominium and housing cooperative financing opportunities to remain high into 2017.Click to see today's rates (Mar 24th, 2017)
The majority of homebuyers use "conforming" mortgage financing.
This means that their loan purchased by one of two government-sponsored entities -- Fannie Mae or Freddie Mac -- and that the loan meets the two group's minimum standards.
Fannie Mae and Freddie Mac use the term "warrantable" to describe condominium projects and properties¬†against which they'll allow¬†a mortgage.
Condo projects and properties which¬†don't¬†meet Fannie Mae and Freddie Mac warrantability standards are known as¬†non-warrantable.
Non-warrantable condos are more challenging to finance.
Typically, a condo is considered warrantable if:
Common non-warrantable properties include condotels, time shares, fractional ownership properties, and other projects which require owners to join an organization, such as a golf club.
Manufactured housing projects and other developments which are not legally considered real estate are also excluded from warrantability. These include house boat and motor home projects.
When buying a condo, ask your real estate agent or lender about the building's warrantability before you go any further.
A warrantable condo typically gets you lower mortgage rates than a non-warrantable condo. Warrantable condos create lower risk for the bank.Click to see today's rates (Mar 24th, 2017)
VA and FHA home loans are¬†government-backed mortgages.¬†FHA loans are insured by the Federal Housing Administration.¬†VA loans¬†are loans guaranteed by the Department of Veterans Affairs.
Both loan types are known for their more flexible lending guidelines than conforming¬†mortgage financing. Loans are available in all 50 states.
The FHA and VA maintain lists of approved communities,¬†but don't despair of the unit you want isn't in a development on those lists. Both agencies have made it easier for condo and co-op associations to get their buildings approved.
In fact, the FHA recently changed its condo approval rules to help more borrowers get qualified.
Some of the new basic requirements for an FHA condo¬†loan¬†now include:
In general, if Fannie Mae or Freddie Mac have already approved a building, the FHA and VA will also authorize lending there.
Neither the FHA nor the VA charge borrowers extra to finance a¬†condominium or a co-op. You can get a condo loan with¬†the same¬†FHA or VA mortgage rate¬†as you could¬†a single-family home.Click to see today's rates (Mar 24th, 2017)
Mortgage financing is a more of a challenge for buyers of non-warrantable condos. There are fewer available programs for these dwellings.
In general, a¬†condo or co-op unit¬†is considered non-warrantable if:
In addition, a condo unit in a¬†project¬†involved in litigation of¬†any¬†kind is usually¬†"non-warrantable." This is true whether the¬†community is the plaintiff or the defendant in the suit.
Non-warrantable condo financing is unavailable via Fannie Mae and Freddie Mac, the FHA or the VA. To get a non-warrantable condo mortgage, you'll need to talk with a specialty lender.
There are plenty of them online.
The housing market has recovered from last decade's downturn, and lenders are more willing to lend on condos and co-ops nationwide.
Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Click to see today's rates (Mar 24th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
Deborah C. Television Crewer
The Mortgage Reports is part of my morning routine. As I read, I learn more, and have come to understand the mortgage industry. I can't thank you enough!
The Mortgage Reports has provided me with helpful advice. I enjoy all the various types of mortgage information. Thank you!
Katrina B. Lab Technician
I look forward to reading The Mortgage Reports. Its information and updates helped me to buy my first home. Thank you!
2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)