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Condo Loans: Options and Requirements Explained

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A condo can be a great option for someone who’s looking to live in an urban area. Condos combine the amenities of a rental apartment complex with the benefits of homeownership. But condos can be trickier to buy and sell because the community you’re purchasing your unit in has a unique set of rules.

If you’re interested in purchasing a condo, take a look at this guide to help you figure out how to finance a condo, including the types of loans you can get and what makes applying for these loans different from other mortgages.

What Is a Condo?

A condo, or condominium, is a building that’s divided into individually owned units. With condos, you own the unit, while everything outside the unit is owned by the condo homeowners association (HOA)

With apartments, you rent the unit you live in, but the entire building – including the unit you occupy – is owned by a landlord or property management company.

As a condo owner, you’re responsible for everything inside your unit, including maintenance, repairs or any upgrades. You’ll also need to follow your building’s HOA rules and be a courteous neighbor.

Additionally, you’ll pay an HOA fee that covers maintenance, repairs and other necessities for everything outside your unit – like hallways, grounds, shared spaces, etc.

How Do Condo Loans Work?

Generally, qualifying for a condo loan is similar to other property types, since many of the same loan programs are available. These include:

  • Conventional loans
  • Federal Housing Administration (FHA) Loans
  • Department of Veterans Affairs (VA) Loans
  • U.S. Department of Agriculture (USDA) Loans

We’ll get into the specific requirements for these loans later, but the initial steps are the same as the general mortgage preapproval process. First, you find a lender and apply for a loan. Once you’re prequalified – or better yet, preapproved – you can submit offers on a property.

The biggest difference between applying for condo loans versus other property types comes during the lender approval process. Lenders have more stringent qualification criteria for condos, which can lead to more steps and paperwork during this phase. 

How are condo loans different?

Condos are generally considered riskier for lenders to finance than single-family homes because jointly owned properties come with more restrictions. To offset the risk, condo loans tend to have slightly higher interest rates than single family homes.

In addition to checking your finances, lenders will also consider factors related to the property. These can include:

  • The building’s age and financial health (HOAs typically maintain annual budgets and reserve funds)
  • The structural integrity of the building and the condition of the grounds
  • The amenities

Lenders may require some additional paperwork or information from either the condo association (aka the HOA) or management company. These can include:

  • A completed questionnaire about the condo project
  • The number of units purchased
  • The number of units that are owner-occupied, tenant-occupied or owned by one entity
  • Any lawsuits involving the condo association
  • The number of unit owners who are delinquent on dues
  • Any upcoming special assessments that may be charged to condo owners
  • Proof of the property’s insurance policy

How you intend to use your condo can also influence the kind of financing you get and the down payment requirement. For example, if you want to purchase a condo as an investment property, vacation home or second home, a lender might require a larger down payment.

Types of Condo Loans and Their Requirements

The type of condo you want to buy and how you want to use it – as a primary residence, vacation home, etc. – will determine the kind of mortgage you’ll need. But no matter which mortgage you choose, you’ll need to provide proof of income and employment.

Conventional loans

Conventional loans (which are  backed by Freddie Mac or Fannie Mae) are offered through traditional mortgage companies. For most conventional loans, you’ll need a credit score of 620 or higher[1] and a debt-to-income (DTI) ratio of 50% or lower.[2] The minimum possible down payment for conventional loans is 3%. However, if you make a down payment that’s less than 20%, you’ll have to pay for private mortgage insurance (PMI).[3]

Warrantable vs. Nonwarrantable condos

A warrantable condo can be financed and underwritten using a conventional mortgage that meets requirements laid out by Fannie Mae and Freddie Mac.

Some of these stipulations and criteria include:[4]

  • At least 50% of the units being owner-occupied (rather than investment properties)
  • Commercial space being 35% or less of the building’s total square footage
  • No single entity owning more than 2 units in projects with 5 – 20 units or 20% of units in projects with 21 or more units
  • At least 85% of the condo units being current or no more than 60 days behind on association dues
  • No lawsuits involving the condo HOA

If a condo is nonwarrantable – meaning it doesn’t meet the requirements set by Fannie Mae or Freddie Mac – it can be trickier to buy or sell. That’s because nonwarrantable condos are considered riskier than warrantable condos. To buy a nonwarrantable condo, you may have to look for financing options outside of traditional lenders or conventional mortgages.

Federal Housing Administration (FHA) loans

These government-backed loans are geared toward first-time home buyers with low credit or who are struggling to save for a down payment.

For most FHA loans, you’ll need a minimum credit score of 500. However, if your credit score is 500 – 579, you’ll need to put at least 10% down.[5] But no matter how much you put down, you’ll have to pay a mortgage insurance premium (MIP).

Department of Veterans Affairs (VA) loans

These are government-backed loans for eligible military borrowers and their surviving spouses. VA loans are unique in that you can purchase a home with no down payment, and technically, there’s no minimum credit score requirement. This is because the VA requires lenders to review the entire loan profile.[6]

U.S. Department of Agriculture (USDA) loans

These are government-backed loans geared toward low- to-moderate income buyers who want to purchase a home in select rural areas. For most USDA loans, you’ll need a credit score of 640 or higher and a DTI ratio of 41% or lower.[7] There’s no down payment required or mortgage insurance, but there is an income eligibility requirement and an annual guarantee fee.

Thinking About a Condo Loan? Calculate Your New Monthly Mortgage

Condo Loan FAQs

Is it harder to get a loan for a condo?

It can be harder due to the slightly higher interest rates and additional scrutiny from the lender.

Why are condos considered higher risk?

Because condos have HOAs, there’s less the borrower can directly control — for example, the maintenance of the exterior of the property. This adds an element of uncertainty that most single-family homes don’t have to contend with.

What is the lowest down payment for a condo?

If you qualify for a USDA loan or VA loan, you should be able to purchase a condo with no down payment. Otherwise, if you qualify for a conventional mortgage, you can put down as little as 3% – although the lender might ask for a higher down payment depending on the property details.

The Condo Lifestyle Isn’t for Everyone

Get a copy of a condo association’s rules and regulations before you apply for a condo loan. And do your homework on the building and unit you’re looking at. This way, you’ll know as much as you can going into a purchase agreement. A real estate agent can help you make a decision that’s best for you.

Keep in mind that condo HOAs may also want to interview you to see if you’d be a good fit in the community.

Condos can be a great option for first-time home buyers who want to live in urban areas or prefer the lower level of commitment and maintenance that comes with condos compared to single-family homes. But the condo lifestyle isn’t for everyone. Make sure it’s a good fit for you before you commit.

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The Short Version

  • Qualifying for a condo loan is similar to other property types. The same loan programs are available, including conventional loans, FHA loans, VA loans and USDA loans
  • The biggest difference comes during the lender approval process. Lenders have more stringent qualification criteria for condos, which can lead to extra steps and paperwork
  • How you intend to use the condo will also impact your financing. For example, if you intend to use the condo as a second home, a larger down payment might be required
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  1. Fannie Mae. “B3-5.1-01, General Requirements for Credit Scores.” Retrieved February 2023 from

  2. Fannie Mae. “B3-6-02, Debt-to-Income Ratios.” Retrieved February 2023 from

  3. Freddie Mac. “Down Payments & PMI.” Retrieved February 2023 from

  4. Fannie Mae. “B4-2.1-03, Ineligible Projects.” Retrieved February 2023 from

  5. U.S. Department of Housing and Urban Development. “Borrower Eligibility Requirements.” Retrieved February 2023 from

  6. U.S. Department of Veterans Affairs. “VA Guaranteed Loan.” Retrieved February 2023 from

  7. United States Department of Agriculture. “Section 502 Direct Loan Program’s Credit Requirements.” Retrieved February 2023 from

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